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Why are so many companies failing?

31st Oct 16 10:39 am

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Company administrations in the third quarter 2016 are up 3.5 per cent quarter on quarter compared to the previous quarter 2016, a rise of 340 to 352, and up 0.6 per cent on the same July to September period a year ago.

Research by FRP Advisory has shown that the volume of all forms of corporate insolvencies rose by nearly 100, a 2.2 per cent rise quarter on quarter to 3,633 for the period of July to September 2016, up 1.1 per cent on the same period a year ago.

Highlights by numbers from the FRP Advisory analysis of Q3 2016 and earlier official data include:

  • 352: number of companies entering administration q3 v 340  in q2 2016, 350 in q3 2015
  • Previous three years annual administrations: 1,400 in 2015; 1,790 in 2014; 2,365 in 2013
  • Annual administrations previous low: 1,602: annual administrations in 2004
  • Annual administrations previous highs: 4,808 in 2008; 4,019 in 2009

Glyn Mummery, partner at FRP Advisory, the business advisory firm, said: “The quarterly increase in the number of company administrations herald a time of further stress on several UK sectors led by the construction, food and agriculture, hospitality and even care sectors which are already bearing the pain of an approximately 20 per cent recent decline in the value of the pound. 

“Overall corporate insolvencies remain still at historic lows but the bottom now seems to have been reached after six months of rising corporate insolvency figures led by administrations, pointing to tougher times starting for some sectors of the economy. The services sector for now is keeping GDP growth alive, large parts of the economy are still stuttering. 

“Sectors which have been reliant on cheap EU based labour as a way of keeping a lid on costs and therefore profit margins may struggle as their end buyers are not always willing to absorb those extra costs from a weaker pound.”

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