Retail sector on “high alert” as company insolvency rates

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insolvency

Experts have warned that the retail industry is on “high alert” following the release of 2017 insolvency figures, which revealed rising liquidation rates.

According to The Insolvency Service, 17,243 companies entered insolvency in 2017, rising 4.2 per cent year-on-year.

This was driven by an 8.3 per cent rise in creditors’ voluntary liquidations (CLVs) in which companies sell off their assets in order to repay creditors.

The wholesale and retail industry was reportedly the third worst hit by insolvencies, seeing 2144 companies enter liquidation last year, a rise of 2.2 per cent.

Experts have warned that the sector was particularly vulnerable due to falling consumer spending.

“Two sectors in particular are on high alert – retail and construction,” HW Fisher & Company’s insolvency partner Brian Johnson said.

“Many high street brands suffered a poor Christmas amid lower levels of consumer spending and continued Brexit uncertainty, and the sharp slowdown in construction is putting extreme stress on building subcontractors – thousands of whom face taking a large hit following the collapse of Carillion.

“The signs are not good and the risk of further business failures should be burning brightly on the Bank of England’s panel of economic warning lights.

“While November’s interest rate rise will turn the screws on struggling companies, its full impact has yet to be fully felt.

“The Bank of England is acutely aware of the risk that hiking rates will push Britain’s army of zombie companies – the weak businesses being kept afloat solely by rock bottom interest rates – over the edge.”

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