Insolvencies continued to fall in the three months up to the EU referendum

insolvency graphPerhaps because of the feverish media coverage before and after the UK EU referendum vote, there has been little if any comment on the continued reduction in company insolvencies.

The most recent figures, published at the end of July for April to June 2016 (Q2) showed a continuation of the downward trend that has been in evidence since their peak in 2009 in the aftermath of the 2008 Great Recession.

An estimated total of 3,617 companies entered insolvency in the last quarter, down 4.2% on the first three months of 2016 and down 2.7% on Q2 in 2015.

By far the biggest driving force remained Creditors’ Voluntary Liquidations, showing a slight rise, by 0.7% on the same period in 2015, and suggesting that creditors are unwilling, or unable, to wait for their money or to enter into arrangements for repayments over a longer period since the use of Company Voluntary Arrangements (CVAs) remains at rock bottom.

Construction Industry struggles

The Insolvency Service has as yet produced no figures for insolvencies by industry sector, but Construction was by far the worst hit from January to March (Q1) 2016.

However, the monthly Markit/PMI statistics are a good indication of the ongoing state of the Construction industry, showing a consistent contraction in both confidence and activity throughout the last six months.

Indeed, after two quarters of contraction the industry is in recession and the post-Brexit July figures gave no relief to the gloom, producing the worst set of monthly figures for seven years.

Given the uncertainty since the referendum, plus the erosion of profit margins due to increased materials costs and a skills shortage in the sector optimism about the health of Construction is not likely to return any time soon.

Certainly there is little prospect of much in the way of commercial construction while the future of the UK economy is in limbo.

It remains to be seen what the Government proposes to do about the acknowledged acute shortage of affordable homes that has been causing such problems (while at the same time pushing up property values). If there is some relaxation of the current restrictions on Housing Associations for new building of social housing there might be at least some relief for Construction.

Leave a Comment

  • (will not be published)

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>