MIDS INSOLVENCY RISK RISES – R3

24-08-2017

The risk of insolvency to Midlands businesses has continued to rise, despite a fall nationally, new research from R3 has found.

Government statistics showed a 15.4 per cent drop in underlying corporate insolvencies in the second quarter of 2017.

But in a new report, trade body R3 has claimed more than one in four companies in the East Midlands (28 per cent) are at higher than normal risk of becoming insolvent, along with 27 per cent in the West Midlands.

R3 Midlands chairman Chris Radford, a partner at Gateley in Nottingham, said: "Midlands insolvency practitioners have been reporting a tougher time for businesses throughout 2017 and our latest sector research backs this up.

"The 15.4 per cent fall in underlying corporate insolvencies in the last quarter was somewhat surprising, but it’s important not to read too much into such a sudden change in one quarter. Prior to this, insolvencies had been rising more consistently than they had done since just after the financial crisis."

In the East, technology and IT was the only sector to report a decline in insolvencies, although it remains the highest risk.

Transport and haulage businesses are the most at risk in the West Midlands, while the hotel industry was the only sector to report a dip in the region.

Chris Radford, a partner at Gateley in Birmingham and R3 Midlands chairman, added: "Businesses have also had some significant increases in fixed costs over the last year. The pound’s travails have raised many import prices, while the 2016 introduction of the national living wage means the minimum wage is now £1 higher than it was in 2015.

"Many companies have seen their business rates rise, while some have also had to comply with pension auto-enrolment. Although the economy is growing, it will need to grow rapidly enough to balance these factors out."

R3's figures were compiled using Bureau Van Dijk’s Fame database.

Source: https://www.insidermedia.com/insider/midlands/mids-insolvency-risk-rises-r3