Insolvencies rising as bad weather and trading pushes firms over edge
- Credit: Roger Barcham, BMS Imaging
Weak growth, adverse weather and tough festive trading may have contributed to a jump in regional business insolvencies in the first three months of the year, according to a trade body.
The latest figures for the East of England show insolvencies rose 13% in the first quarter of 2018 compared to the previous quarter and edged up 0.6% against the same period last year.
Restructuring organisation R3 Eastern said high-profile casualties – such as outsourcing giant Carillion, electrical retailer Maplin and toy seller Toys R Us – had put corporate failures at the top of the agenda.
R3 Eastern chairman Mark Upton said: 'Insolvency has definitely risen up the agenda over the first quarter of this year, with a roll-call of high-profile names – Carillion, Maplin, Toys R Us – entering a statutory insolvency procedure. There have also been widely-reported restructuring efforts among a number of other chains, especially in the casual dining space.
'Crucially, any time a company encounters difficulties there is a 'domino' effect on its suppliers and customers, who may face their own financial problems as a result of lost income or key supplies.
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'Although there was plenty of support on hand for Carillion's sub-contractors, suppliers and customers from the financial services industry, for example, our members still reported an uptick in requests for advice.'
Mr Upton, a partner at East Anglian accountancy firm Ensors, said a raft of profit warnings and lower-than-expected results in the first quarter pointed to a difficult trading period, with Black Friday pulling consumer spending forward and eating in to the New Year sales.
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He added: 'The Beast from the East and repeated episodes of bad weather are also contributory factors. Indeed, government statistics indicate that there has been barely any economic growth in the first quarter of this year.'
R3 said the period between January and March, which falls at the end of the financial year, tends to be a time when directors take stock of their position, leading more of them to seek advice.
However, Mr Upton said there were positive signs for the region with consumer confidence beating market expectations in March and pay growth now slightly higher than inflation, meaning shoppers will have more buying power.