Interest rate rise could have been the final straw for some struggling businesses

Latest insolvency figures show even a small interest rate rise can have a major effect on UK businesses


July 2nd 2018

The November 2017 interest rise from 0.25% to 0.5%, small though it was, could have been the final straw that broke the camel’s back for many struggling UK businesses, according to business advisory and corporate recovery firm Quantuma.

The November 2017 interest rise from 0.25% to 0.5%, small though it was, could have been the final straw that broke the camel’s back for many struggling UK businesses, according to business advisory and corporate recovery firm Quantuma.

Managing partner Carl Jackson said the latest insolvency figures reflected how the slightest movement in interest rates, coupled with the fragility of business confidence, could have a major effect.

In the first quarter of 2018, company insolvencies rose to the highest level since the first quarter of 2014. This was principally caused by a rise in underlying creditors’ voluntary liquidations and compulsory liquidations.

The figure for individuals was up in the first quarter of 2018 to its highest level since the third quarter of 2012.

Individual voluntary arrangements, often chosen as an alternative to bankruptcy, reached a record high, and bankruptcies and debt relief orders were also up.

The surge in corporate insolvencies was partly down to a number of personal service companies being wound up as HMRC’s crackdown on those they consider to be in “employment” rather than self-employed has taken effect.

Carl Jackson said: “At a time when the UK economy is generally in a good place, with strong employment, these figures reflect a shake out of companies that have been struggling for some time.

“Certainly, uncertainty over interest rates and the UK’s future trading relationship with the rest of the world will have been a factor, but the brutal fact is that for many of these companies, their time had simply come.

“This once again emphasises the need for company directors to grasp the nettle when they can see that trading is difficult, cashflow is tightening and orders are down.

“It is no use turning your back on the facts. The figures in management accounts don’t lie, but companies can be rescued if expert advice is taken at the earliest possible opportunity.

“We would urge any business owner who has concerns to talk to us in strictest confidence and we will be able to provide an independent, ‘cold light of the day’ look at their finances and future prospects.

“Many good businesses can be rescued if early action is taken to restructure and refinance them,” he said.

Ends 

Notes to Editors

Quantuma is a leading business advisory firm which works with businesses at the key milestones, delivering partner led solutions to help clients take advantage of opportunities and overcome a range of operational and financial challenges, enabling them to achieve their business objectives and ambitions. Offices in London, Southampton, Marlow, Watford, Brighton, Birmingham, Bristol, Manchester, Ringwood and Weymouth.