Corporate insolvencies rose in the first quarter of 2019, with administrations reaching their highest level for five years, official figures from the Insolvency Service show.
There were 4,187 total underlying company insolvencies in Q1 2019, 6.3% more than in Q4 2018. Compared with the same quarter last year, this was an increase of 5.1% and marks the second highest underlying level of insolvencies in any quarter since Q1 2014.
The hike was driven by increases in company voluntary liquidations (CVLs), which increased by 6.2% compared with Q4 2018, hitting 2,822, as well as administrations, which were up 21.8% at 451. Company voluntary administrations (CVAs) also increased by 43.1%.
The proportion of administrations increased to 10.8% in Q1 2019, the highest proportion since Q1 2014. Compared with the same period last year, there were 26.8% more administrations.
According to the Insolvency Service, the repair of vehicles industry grouping saw the largest increase in underlying insolvencies, with 67 extra cases compared with the 12 months ending Q4 2018. This was closely followed by the administrative and support services grouping (66 additional insolvencies); manufacturing (58 additional insolvencies); and the accommodation and food services grouping (57 additional insolvencies).
The arts, entertainment and recreation industry saw the largest decrease in underlying insolvencies, with 23 fewer cases compared with the 12 months ending Q4 2018. Excluding bulk insolvencies, in the 12 months ending Q1 2019, the highest number of new company insolvencies remains in the construction industry with 3,013 insolvencies – up 0.6% from the 12 months ending Q4 2018.
Stuart Frith, president of insolvency trade body R3, said: “These underlying insolvency figures – the highest first quarter figures since 2014 – reflect the impact of stuttering consumer confidence and, to a degree, Brexit uncertainty on the business community.
“The first three months of each year are where we typically see the consequences of missed targets in the run-up to Christmas and the end of the year, particularly in the retail sector. Consumer confidence is low and consumers’ spending power is much diminished. Meanwhile the high street is facing serious structural challenges as it comes to terms with changing consumer habits and online competition.
“Many consumer-facing businesses, in particular those in the retail sector, have exhausted their ‘standard’ toolkit for coping with reduced demand: further discounting won’t cut it, or is impossible, and a restructuring is the only option.”
Insolvency Services data also shows total individual insolvencies fell in Q1 2019 from an eight year high in Q4 2018. This fall was largely driven by a decrease in the number of individual voluntary arrangements, though both debt relief orders (DROs) and bankruptcies fell slightly from Q4 2018.
There were 31,527 individual insolvencies in Q1 2019, 8.1% lower than in Q4 2018. Although total individual insolvencies fell this quarter, they remain elevated compared with recent years and increased 15.9% compared with the same quarter in 2018. Total individual insolvencies in Q1 2019 were the second-highest since Q3 2010.