Corporate insolvencies rise as consumer confidence falls
Corporate insolvencies continue to rise with companies struggling to cope with falling consumer confidence and Brexit uncertainty.
Underlying corporate insolvencies rose by 6.3% in Q1 2019 compared to Q4 2018, and rose by 5.1% compared to Q1 2018.
Stuart Frith, president of insolvency and restructuring trade body R3, said: “These insolvency figures – the highest first quarter figures since 2014 – reflect the impact of stuttering consumer confidence and, to a degree, Brexit uncertainty on the business community.
“The first three months of each year are where we typically see the consequences of missed targets in the run-up to Christmas and the end of the year, particularly in the retail sector. The pre-Christmas period can be make or break, and Christmas 2018 was particularly tough.”
Frith says the factors causing the rise in insolvencies have been around for some time and don’t look like going away soon.
Consumer confidence and spending power is low, while the High Street is facing major structural challenges due to online competition.
Consumer facing businesses have tried techniques such as offering discounts to customers in a bid to increase demand. However, they are being pushed to the limit and struggling to remain viable.
This is also causing problems for other businesses.
The uncertainty surrounding Brexit has been another factor that has caused businesses to struggle as it is difficult to plan when they don’t know what problems or opportunities any future trading relationship with the EU will bring.
Frith said: “This was particularly acute in the first quarter of this year as we approached the original ‘Brexit Day’ on 29 March. No Deal preparations put pressure on businesses to stockpile goods and materials, in turn putting pressure on their cashflow. Meanwhile, businesses reliant on EU trade saw orders and investment stall.”
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