Deloitte Warning As Insolvencies Decline

08 Nov 2019 | 04.42 pm

Deloitte Warning As Insolvencies Decline

Fifty companies go bust every month

08 Nov 2019 | 04.42 pm

The number of corporate insolvencies fell by 21% year to date to end-September, according to Deloitte, which cautioned that Brexit could push numbers up once again.

The insolvency total year to date was 439 compared with 557 a year earlier.

CVLs (creditors’ voluntary liquidations) accounted for 280 insolvencies. There were 50 court liquidations, up from 39 a year before.

The 84 recorded appointments of a receiver compares with 106 in the same period in 2018.

Deloitte partner David Van Dessel (pictured) commented: “The figures suggest that the decline in receivership activity recorded in recent years has now levelled out. A further decline in corporate receivership activity over the next year is not generally anticipated, as acquirers of loan books in 2018 and 2019 work through non-performing loans and enforce over company assets on foot of charges held.” 

Deloitte counted 25 examinerships so far through 2019, down from  33 last year.

“The statistics continue to suggest a significant tendency to liquidate companies in difficulty and, in some cases, to take the risk of attempting to trade out of insolvency,” Van Dessel added. “Where a company ultimately fails and enters an insolvent liquidation process, the consequences for the directors of adopting the latter approach can be serious, including the possibility of a restriction or disqualification order, or the possible imposition of personal liability for corporate debt in certain circumstances. 

“Seeking advice at the first signs of difficulty and exploring all options available would significantly reduce a director’s risk of culpability in circumstances where a business ultimately fails and enters an insolvent liquidation process.

“The continued high level of insolvencies within the construction industry would suggest that certain companies operating within the sector are impacted by market pressures and price competitiveness, in addition to legacy issues from the financial crisis.  However, a growth and strengthening of the sector has been observed during the first half of 2019.”

Van Dessel expects full-year insolvencies to total c.600.

“However, a hard Brexit scenario would impact on insolvency levels in the short term, and could change the business ecosystem to such an extent that the business models of some companies might no longer be viable, due to factors such as tariffs, logistics, regulatory approval and currency exchange rates, and more generally the ‘domino effect’ that is inevitably caused by the bad debt that arises when a company fails.”

 

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