Member Article

General Election worries add to corporate insolvency gloom

THE latest figures from the Government’s Insolvency Service show an unexpected rise in the number of companies going into liquidation.

And a leading insolvency expert says that the forthcoming General Election is simply adding to uncertainty throughout the business community about the future.

“Many business owners have been complaining that since the General Election was called, things have ground to a halt,” said Paul Moorhead, of Sheffield insolvency and business turnaround specialists Graywoods.

“This is not confined to Sheffield and South Yorkshire but is very much a national trend and on top of the latest insolvency statistics it is a worrying one.”

The new figures shows that the number of companies being wound up in the first three months of 2017 increased by 5.3 per cent on the previous quarter and by 5.4 per cent in comparison with the same period last year.

Overall, and seasonally adjusted, 14,935 companies went into liquidation in the 12 months up to the end of March.

“The number of business failures overall is still well below the peak seen in 2008 and early 2009 but a rise in the number of companies being wound up at the current stage of the economic cycle when economic indicators suggest the economy is growing, may be cause for concern,” said Paul.

“If the number of company failures continues to rise, this can trigger a domino effect, with businesses being sent to the wall by their own customers’ insolvency problems.”

The General Election’s unsettling effect, he added, simply added to an already unexpectedly volatile situation.

“Because of the economic turmoil we have been through in recent years business owners don’t need much of an excuse to keep their money in the bank,” he said.

“There is actually money out there but people don’t want to borrow in this climate of uncertainty and some of those who are borrowing may be doing so for the wrong reasons, throwing money at the problem rather than addressing the underlying causes of cash flow problems.”

Paul added, however, that for companies affected by the unexpected rise in insolvencies could still take successful avoiding action.

“Often, the need to close a company can be avoided by taking action as soon as there are signs of a problem,” he said.

“The importance of maintaining up to date and realistic cash flow forecasts cannot be overstated and accurate projections and management information allow potential problems to be spotted at an early stage, giving time for a solution to be found.

“There is a raft of turnaround options that can be used to rescue companies and avoid the need to wind them up but time is always of the essence and the sooner help is sought, the more palatable the options will be.”

This was posted in Bdaily's Members' News section by John Highfield .