Climbing compulsory corporate insolvency rate ‘a sign of creditor crackdown’

Published on February 6, 2015 by Crawfords Accounting

An increase in the compulsory corporate insolvency rate in Q4 could be a sign that creditors are becoming less lenient towards their debtors, according to a spokesperson for R3.

Louise Brittain, council member at the insolvency trade body, pointed out the rise in compulsory company liquidation, amidst a picture of generally falling business insolvency over the course of 2014 as a whole.

“It’s notable that compulsory liquidations have risen slightly,” she said.

“This may be a sign that creditors may be becoming less lenient to debtors than they have been since the financial crisis.”

After seven years, the corporate insolvency rate is now nearing the level it was at before the financial crisis took hold; however, the coming months could still deliver further shocks.

Ms Brittain explains that company liquidations often increase in the first quarter of the new year, due to unexpectedly poor Christmas trading conditions.

And of course, 2015 is likely to see the first upward base rate move of the new economic cycle, which could be disastrous for businesses and households alike.

“How big an impact eventual interest rate rises will have on businesses remains unknown,” Ms Brittain warned.

“Although initial rate rises are likely to be very small, there are many businesses – and households – already at their financial limits.”

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