Figures from the Insolvency Service show that underlying corporate insolvencies rose by 0.4 per cent in the third quarter of 2019 compared to Q2 and rose by 1.6 per cent compared to the third quarter of 2018.
Meanwhile, the report found that the number of businesses entering administration jumped by 20 per cent.
The figures show the extent to which the economic and political uncertainty of the last 12 months have taken their toll on businesses, with consumers focusing on the essential items rather than big purchases.
The retail sector was particularly badly hit, with 1,252 insolvencies in the industry in the last year compared to 1,232 in 2018, taking the number of closures to a five-year high.
The number of insolvencies in the sector was also 31 per cent higher than the 958 recorded in 2015, before the Brexit referendum.
The Insolvency Service report also found that the number of individuals entering financial distress in the third quarter of this year rose to 30,879, a 23 per cent rise on Q3 2018, reaching an almost 10-year high.
A similar study, the Red Flag Alert, also found that the number of businesses in significant financial distress has increased by 40 per cent since the EU referendum three years ago. The Alert revealed that 489,000 UK businesses were in difficulty by the end of September.
It found that the real estate and property, construction, retail and travel sectors were most severely affected. There was also an eight per cent year-on-year rise in companies facing critical financial distress, which the report says is an “indicator of looming insolvency”.
The increase in insolvencies and administrations is very concerning and it is important that you carefully monitor your client’s performance and seek help at the first sign of distress. Early action can be critical in the turnaround of a business, so please contact us.