Corporate insolvencies ‘expected to rise’ due to Brexit
The decision to leave the EU has already hurt business finances and will quickly lead to a rise in corporate insolvencies, according to a survey of its members by the insolvency and restructuring trade body, R3.
Its figures show that 72% of respondents believe the referendum result will cause corporate insolvency numbers to rise by the end of this year, while 55% say business finances have been hurt since June.
The insolvency experts are most concerned about a ‘hard Brexit’: 76% think it would lead to more corporate insolvencies and 60% think such a scenario would cause personal insolvencies to rise. A ‘soft Brexit’ option, meanwhile, is seen as less risky for businesses and individuals.
They expect manufacturing, financial services and retail to be the three sectors most adversely affected by Brexit; mining, defence and IT are the industries least likely to be affected.
Andrew Tate, president of R3, said: "The insolvency and restructuring profession is concerned about the impact leaving the EU will have on the financial health of UK businesses. Even before leaving, the effects of ‘Brexit’ are being felt: a suddenly weaker pound and increased business uncertainty are already causing problems."
The figures highlight the need for businesses to keep a tight rein on finances as other companies start to feel the strain.
One early warning sign that a business may be in trouble is the late payment of invoices. If they become insolvent and fail to pay, they can jeopardise the viability of otherwise successful enterprises.
Firms need to be ready and willing to take early action when necessary to ensure prompt payment of invoices to protect their own future. Quite often, a letter from a solicitor is enough to ensure payment; if not, there are other legal avenues available up to and including court action.
Please contact Neil O'Callaghan if you would like more information about the issues raised in this article or any aspect of debt collection and credit control.