Insolvencies increase as uncertainty starts to bite | KPMG | UK

Insolvencies increase over 2017 as uncertainty starts to bite

Insolvencies increase as uncertainty starts to bite

The number of companies falling into administration across England and Wales rose over 2017, although insolvency activity slowed during the final quarter of the year.

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Analysis by KPMG of notices in the London Gazette shows that the number of companies entering administration increased from 1,156 in 2016 to 1,206 in 2017 – an increase of 4.3%. However, the final quarter of 2017 showed the fewest number of administrations (279) of any quarter during the year, and also fewer than the same period in 2016 (293).

Blair Nimmo, global head of restructuring at KPMG, commented: “2017 saw an uptick in the number of corporate insolvencies, including landmark cases such as Monarch Airlines, Jaeger and Jacques Vert.

“There’s no doubt we’re seeing a subtle shift towards more difficult times for businesses across the board. The weak exchange rate, rising inflation and the negative effects of uncertainty on consumer and corporate confidence could certainly combine to prompt the number of insolvencies to climb more sharply in 2018.
“Retailers in particular continue to have a tough time, with a number of companies issuing post-Christmas profit warnings or announcing store closures. Elsewhere, businesses related to food, either in manufacturing or casual dining, continue to bear the brunt of raw material price inflation, falling margins and tightening consumer spending.

"Additionally, the increases to the Minimum and Living Wage, auto-enrolment pensions and apprenticeship levies have also impacted employment costs, at the same time that business rate hikes are eating into the reserves of many companies in this space.”

Blair Nimmo continued: “This means that in addition to our usual insolvency work, we’re currently assisting a number of our clients develop strategies that will improve profitability and prepare their businesses for continued economic and political uncertainty. Whilst interest rates remain low, and sources of finance plentiful, the credit appetite of some lenders is beginning to tighten as they recognise the pressure points in the economy. This means that those businesses which have been struggling and relying on refinancing to see them through the last few months now have potentially fewer options on the table.

“It’s also clear that issues such as Brexit and volatility in the capital markets will continue to muddy the waters, potentially stifling investment in some quarters and intensifying the competition for talent in a number of sectors.

“We should therefore expect businesses to remain cautious over the coming months as they engage in strategy setting and contingency planning.”

 

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Notes to editors:
For media enquiries, please contact:

Katy Broomhead, Senior PR Manager
T : 0161 246 4623
M : 07824 537963
E : katy.broomhead@kpmg.co.uk

KPMG Press Office: 020 7694 8773

 

About KPMG in the UK

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 14,500 partners and staff. The UK firm recorded a revenue of £2.2 billion in the year ended 30 September 2017. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 152 countries and has 189,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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