Do the Q1 insolvency figures suggest Brexit chickens coming home to roost?

Brexit chickensYet again, as in the last quarter of 2017, construction and retail were the top two sectors in the insolvency statistics for January to March 2018.

The first three months of 2018 were at their highest quarterly level since the same quarter in 2014, with a total of 4,462 companies entering insolvency, 3209 of them via Creditors’ Voluntary Liquidations (CVLs) accounting for 72% of all the quarter’s insolvencies.

Total insolvencies also represented a 26.2% increase on the same quarter in 2017 and an increase of 13% on the pre-Christmas October to December quarter.

Regardless of the excuses of the usual post-Christmas slump, and this year, the effects of the three-week weather event known as “Beast from the East”, it seems clear now that insolvency numbers are heading inexorably upwards as they were throughout 2017.

Equally clear, given the vast numbers of CVLs as a proportion of the total, it seems that company directors are no more optimistic about the future and are continuing to throw in the towel.

So, was “project fear” actually “project reality”?

In the aftermath of the June 2016 majority vote in the referendum to leave the EU, much scorn was heaped on the alleged scaremongering tactics of the Treasury and the then Chancellor of the Exchequer George Osborne for their warnings about the negative effects of Brexit on the UK economy.

While those supporting leaving the EU remain upbeat, the evidence is mounting that all is not well.

Consider the evidence.  Despite the improvements in global growth in the last two years the UK has dropped from being one of the top seven performers to the bottom and last week the ONS (Office for National Statistics) reported that UK growth for January to March had dropped to 0.1% from 0.4% in the previous three months.

The CBI interpreted this as the start of a prolonged economic slowdown and its survey of manufacturers, services and distribution companies led it to predict a near-standstill situation for the next three months.

In a pessimistic comment piece in Sunday’s Observer, the writer Will Hutton was of the opinion that the UK economy was heading for imminent recession, citing as examples the slumps in mortgage approvals (by 21%) and car manufacturing (by 13% for the domestic market and by 12% for export). These are significant examples given that the UK economy depends heavily on consumer spending and confidence, both of which have been in short supply for some time now.

While the pro-Brexit camp remain relentlessly upbeat about the UK’s economic future despite the continued opacity of the negotiation process and the goals, is it time to concede that the fears of those in favour of remaining in the EU are being realised and the Brexit chickens are coming home to roost?

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