Insolvency trade body R3 has warned that post referendum inflation and weaker pound have hurt businesses’ bottom lines.
R3 says as data shows prolonged fall in corporate insolvencies seen between 2010 and 2016 appears to now be in reverse.
According to Q3 stats from the Insolvency Service, underlying corporate insolvencies rose 15 per cent between Q2 and Q3, and are also 15 percent higher than this time last year.
Although corporate insolvency data has bounced around in recent quarters, the Q3 stats – which cover England and Wales – are in line with an underlying rise in bankruptcies since the middle of 2016.
R3 said businesses are coming under more strain from rising costs, partly due to factors relating to last June’s referendum.
In a statement, R3 president Adrian Hyde warned that businesses have faced a number of fresh challenges over the last year. Increasing input costs caused by post-referendum inflation increases and a weaker pound, a rising national living wage, the added costs of pensions auto-enrolment, and, for some businesses, rising business rates will have hurt bottom lines.
“Some of these added costs will have been passed on to customers, but reliance on consumer confidence isn’t necessarily a recipe for long-term financial health. Consumers’ ability to absorb price rises is limited, and with spending fuelled by consumer debt, potentially unsustainable. An interest rate rise is just around the corner, too. Although it may be a small one, it may be too big for those businesses and their customers already on the edge.”
Hyde added that R3’s own statistics show the number of businesses with signs of growth have fallen from recent record highs, while the number of businesses with signs of distress are increasing from recent record lows.