Company Insolvencies Fall in Q2 2017, but 20% of Estate Agents on Brink of Insolvency
As Insolvency Practitioners, we keep a close eye on what’s happening in the business world. Amidst very mixed data, some recent encouraging news for the economy came from statistics that showed the total number of company insolvencies is down in England and Wales. However, it was concerning to see that nearly 1/5th of estate agents are facing insolvency. In this article, one of our Licensed Insolvency Practitioners, Tom Gardiner, looks at some of the detail behind these statistics.
Lowest Level of Company Insolvencies for 17 years
According to the latest quarterly figures released by the Insolvency Service, the underlying number of company insolvencies in England and Wales in quarter 2 2017 has fallen to the lowest quarterly level in 17-years.
On the face of it, the number of companies entering liquidation in quarter 2 2017 actually increased, but this was mainly caused by 1,131 connected personal service companies entering liquidation on the same date following government changes to claimable expenses rules. Once these ‘one off’ liquidations are removed, the quarterly fall in liquidations is 16%, with the year on year figures down by 3.5%.
Good News for the Economy?
The problem with these statistics is that they only show the companies that are failing, and do not give any indication of the number of companies that are only just surviving.
The concern is that with inflation eating into margins and consumer confidence on the wane, especially as uncertainty persists over the outcome of the Brexit negotiations, the number of companies feeling under pressure is rising. For many, especially SMEs, we are hearing that the only reason they can continue is a direct result of the country’s continuing low interest rate environment.
Recent hints and movements in voting on the monetary policy committee of the Bank of England suggest that the days of rock bottom interest rates could be numbered. This could spell trouble for many companies.
A Fifth of UK estate agents on brink of insolvency
An enduring trait of the economy is that the insolvency picture is uneven across different industry sectors. The underlying insolvency trend – economy wide – is down, as the latest statistics show, but traditional high street estate agents is one sector that is struggling. This is because of tighter margins, fewer transactions and increasing competition from online estate agents, who continue to grow their market share.
Recent research by the accountant, Moore Stephens, has found that c.19% of estate agents registered as limited companies are exhibiting warning signs that indicate they are at risk of insolvency. Indeed, an analysis of Companies House records showed that 4,928 estate agents out of a total 25,560 showed signs of financial distress. Further details show:
- Smaller agencies are the most vulnerable. This is because the largest agencies have million pound advertising and marketing budgets, helping them to increase their market share in a declining market. There were 1.7 million sales in 2006/07, but property sales have dropped 32% to 1.2 million sales in 2016/17.
- A report by HSBC found the overwhelming majority of British house buyers used online methods when researching and buying property and that this was leading to the home buying and advice process changing “beyond recognition.”
If your Business is Facing Insolvency, Contact Our Insolvency Practitoners
As this brief snap shot shows, the overall insolvency picture might be encouraging, but specific industries, such as the traditional estate agent are showing signs of risk. This is when key stress indicators, such as HMRC debt, Creditor Pressure and Cash Flow Problems begin to become a problem. Have a look at our testimonials to see some of our successes.
The role of insolvency practitioners has evolved in recent years, with a greater focus on business rescue and turnaround, rather than liquidation when insolvencies occur. If you are a director of a business that is facing financial distress and insolvency, call us on 0208 088 0633 or contact us for an initial FREE discussion.
Our focus is on preserving businesses as trading entities if we can, and helping them turn around. The sooner you get in touch, the more we can do to help.
