Commenting on the quarterly insolvency statistics (for July-September 2015) published by the Insolvency Service today, Neil Harrold, North East vice chair of insolvency trade body R3 and a partner at Hay & Kilner Solicitors, says:
“The numbers of corporate insolvencies continue their long and slow decline since their peak in the recession. Although this week’s growth figures show businesses aren’t exactly flying, not too many are really struggling either.
“The unique conditions of this recovery – low interest rates and creditor forbearance – meant we never saw the traditional post-recession spike in corporate insolvencies. The circumstances of this recovery have also given businesses the space and time needed to restructure themselves outside of the formal insolvency process. The current low levels of inflation, lack of pressure for wage increases and the strong pound helping importers, may also be assisting businesses at the moment.
“According to R3’s most recent membership survey, the most common recent causes of business struggles have been the underperformance of particular products, the failure of long-term business strategy, or a mistake by the business. At the moment, it is more likely that businesses are causing their own problems rather than any particular economy-wide headwind.
“One such headwind could be an interest rate rise, although the timing of this keeps moving beyond the horizon. R3’s last Business Distress Index found one-in-five businesses saying an interest rate rise could cause them to struggle. The other 80% may not be affected directly, but they should think about how a rise will affect consumers as this will have a knock-on effect on them.
“Easier access to non-traditional finance for businesses may be helping to keep the number of insolvencies down. While the banks are open to lending they remain cautious, but there are many other types of funding available. Peer-to-peer lenders and venture capitalists are keen to lend as they can see better rates of return than from traditional investments.”
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