UK company insolvencies are on the increase following a ‘tipping point’ in the second quarter of 2016, according to a report from trade credit insurers Euler Hermes.
The nation is currently predicted to see a similar total number of company insolvencies in 2016 as in the previous year, at an increase of just 1% to 20,000.
But beyond that, Euler Hermes forecast an 8% rise in 2017, a 6% increase in 2018, and at least a further 9% in 2019.
This ‘best case’ estimate for 2019 is based on a so-called ‘soft Brexit’ deal giving UK companies access to the single European market – and could rise to 15% in a ‘hard Brexit’ scenario.
As a consequence, 26,570 UK company insolvencies would be recorded in 2019 alone, and the total would reach 91,470 for the period from 2016 to 2019.
Valerio Perinelli, CEO of Euler Hermes UK & Ireland, said: “Investment is driven by confidence, and uncertainty is the enemy of confidence.
“The economy should remain relatively resilient until a formal exit from the EU in 2019, assuming Article 50 is invoked in March 2017.”
But he added that businesses should already be planning for Brexit and the different ways in which they might be affected by it.
For example, in industries that rely on imports and foreign currency deals, input costs have already increased as a consequence of the weaker pound.
And in investment-heavy industries like construction and aeronautics, as well as businesses that use the latest IT equipment, stalling on spending now could lead to a decline in performance later.
The picture will not become fully clear for several more months – and potentially several years before the changes to the UK economy become completely settled – leaving businesses in all sectors facing an uncertain future moving into 2017.
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