The real effect of continued Brexit uncertainty on businesses
It was recently reported in the Financial Times that UK company insolvencies have risen to the highest level seen in 5 years. This followed figures released by the Insolvency Service, the government run agency responsible for supporting those in financial distress, that indicated company insolvency rose by 2.6% last quarter. The timing suggests that continued Brexit uncertainty is to blame. It was during these months that it became apparent Brexit would be delayed until October. Theresa May also announced she was stepping down as Prime Minister, leaving Boris Johnson as her likely successor. The resulting insecurity felt has led to a 12% increase in the number of corporate insolvencies compared to the same quarter last year.
Small Businesses and the self-employed are suffering most from the strain. Most are reluctant to invest and unable to plan until the state of the UK’s relationship with the EU is finally known. The number of businesses entering Creditor’s Voluntary Liquidation, where a company’s shareholders decide to wind it up, increased by 7%. The number of companies entering administration, in which companies have protection from winding up proceedings whilst they undergo restructuring, also remains high. There are some sectors in particular that are struggling, such as the construction industry who have been affected by late payments and the potential impact Brexit will have on immigration. Over 28% of the skilled construction workers in London are from Europe. However, Brexit uncertainty means that a lot of companies are relying on costly subcontractors rather than taking on permanent employees. Other industries feeling the pressure are administration, hospitality and retail. We took a closer look at why the retail sector is suffering here.
This trend seems set to continue, as for many small businesses, a no deal Brexit may be the final nail in the coffin. It’s advisable to contact an insolvency practitioner as soon as a business identifies it is struggling to give the best possible chance of recovery. For advice on your business contact Chamberlain & Co on 0113 242 0808 or here.
