The latest official figures from the Insolvency Service show a rise in the number of corporate insolvencies for the first three months of the year. Administrations are now at their highest level for five years.

 

Q1 company insolvencies

Between January and March there were a total of 4,187 underlying company insolvencies. This is a 6.3% rise from the last quarter and an increase of 5.1% compared to the same period in 2018. Since the first quarter of 2014 this is the second highest underlying insolvency figure.

The main force behind the rise was the number of company voluntary administrations (CVAs) which increased by 43.1% compared to the last quarter; as well as a 21.8% rise in administrations during the same period. There was also a 6.2% increase in company voluntary liquidations (CVLs), but compulsory liquidations decreased by 2.7% from the fourth quarter of 2018.

 

Construction and retail sectors continue to be hit

Two of the industry sectors that have been hit the hardest by insolvencies are construction and retail. Administration businesses have also seen a significant level of insolvencies across the first three months.

The construction market saw the highest amount of new company insolvencies in the first three months of the year. There was a total of 3,013 insolvencies – a rise of 0.6% from the 12 months ending Q4 2018.

This sector continues to face the issue of late payments, which can put substantial pressure on businesses. Other financial pressures affecting small and medium-sized businesses include higher wages and the costs of the pension auto-enrolment system.

The industry with the biggest decrease in underlying insolvencies was the arts, entertainment and recreation sector. Here there were 23 fewer instances compared to the 12 months ending Q4 2018.

 

Pressure on small businesses

An increasing number of small businesses in the UK are facing financial stress. Figures from the insolvency company Begbies Traynor show that, at the end of March 2019, 484,000 businesses were in significant distress.

There was an increase of 17% year on year in the number of businesses facing critical distress in the first quarter of the year. This classification is often a precursor to a company entering formal insolvency proceedings.

Market sectors that are faring particularly badly are property, hotel and accommodation and financial services companies.

 

How can I improve cash flow?

A lack of cash flow is one of the main reasons behind company insolvencies. It’s now more important than ever to ensure your business maintains a healthy cash flow.

An effective way of achieving this is to minimise the number of bad debtors the company has and chase up unpaid invoices quickly. The sooner you start, the sooner you will have the money and the quicker any issues can be resolved.

At CEA Limited we work with businesses across a range of industry sectors to help them recover debts from customers and keep the cash flowing. We can start chasing up invoices as soon as they become overdue and offer a low fee structure to help you recover debts quickly.

Contact one of our commercial debt recovery team to discuss how we can recover outstanding invoices for you.