The numbers, taken from notices in the London Gazette, reflect the benign conditions seen in the first three months of this year - Q1 2016 saw 299 corporate insolvencies compared to 273 in Q2 2016 - and indeed, also mirror the same period of 2015, when 294 companies entered insolvency.
Charles le Strange Meakin, Senior Audit Partner at KPMG in Cambridge, attributes this softening of insolvency numbers to a combination of companies getting a tighter grip on costs and cash flow in recent years, coupled with the wide availability of affordable funding for businesses from an increasingly broad spectrum of lenders.
He said: “The latest insolvency statistics reflect the position immediately prior to the EU referendum when generally, businesses were adopting a “wait and see” approach in a relatively stable environment. Indeed in relative terms, insolvency numbers are and were running at historically low levels.
“Of course, the full impact of Brexit remains to be seen, albeit the uncertainty and volatility seen in the capital markets in the wake of the referendum result is likely to have put some companies on a shaky footing. Clearly some sectors will be more exposed than others; those who already operate on tight margins or who have currency exposures will be feeling the squeeze more acutely.
“However, the lessons learnt during the 2008 global financial crisis has meant the majority of UK businesses have got used to having a much tighter grip on their cash-flow, and has also left them more fleet of foot when it comes to handling crises - something which should put them in a stronger position to navigate the weeks and months ahead.
“One thing is for certain. We are in unchartered waters, so being on the front foot and planning for potential change is crucial.”
Whilst there are some small regional variations in the pattern of insolvencies, the picture is broadly the same across the country. Interestingly, whilst the majority of those businesses failing have borrowing facilities with the main lending institutions, the first six months of the year have seen an increasing number of insolvencies of businesses which are funded either wholly, or in part, by alternative lenders such as crowdfunders, peer-to-peer platforms and other fintech and alternative investors – an indication of their growing prominence on the overall funding landscape.
Looking at specific sectors, the recent high-profile failures of retailers including BHS, Austin Reed and My Local signifies that companies on the high street continue to experience challenging trading conditions, something which will be no doubt exacerbated by the late, or non-arrival, of the British summer.
Charles concluded: “While it will be some time before we see the full extent of the impact of the Brexit vote on consumer confidence, retailers will be hoping that some sunnier weather and the possibility of an interest rate cut will drive shoppers back to the high street.”
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UK businesses in strong position to face challenging period ahead, says KPMG
18 July 2016
New analysis from KPMG Restructuring shows that whilst the run up to the EU Referendum created a period of uncertainty for British business, the number of companies entering insolvency across England and Wales in the second quarter of 2016 actually fell.