Yesterday the UK Insolvency Service released their quarterly statistics spanning October to December 2019. These confirm that liquidations and administrations in 2019 hit levels not seen for over five years. This signals a potentially serious underlying concern about the UK economy.
Brexit uncertainty may have played a part, although we could now see a more positive bounce given the more stable political environment.
Construction and support services have been hardest hit, followed by the wholesale, food and manufacturing sectors. These are big employers but all too often they are also businesses with wafer thin profit margins. It may take more than renewed political optimism to re-shape their addressable market and make them more robust.
The 24% upsurge in administrations last year may have had something to do with landlords unwillingness to accept CVAs. Many UK retailers have sought refuge via the CVA regime to reduce unsustainable fixed rent costs but landlords have been increasingly vocal in their opposition to that tactic. The only place left to go if CVAs are no longer viable is administrations, which are a far more intrusive insolvency tool. Despite a multitude of best intentions, relatively few businesses survive intact following administration.
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