As a practice based in the South West of England, insolvency is split into two parts for us. One part revoles around corporate work or helping companies in trouble. The other, is personal work, which involves individuals either in business or have run up debts as a consumer.
The recent ‘Insolvency Service statistics’ for the second quarter of 2014 show that corporate insolvencies are down by around 20% overall, which means less liquidations and company administrations. This is good news and clearly a positive sign.
It’s not what a lot of people in my profession had predicted. The majority of them said that corporate insolvencies would rise as we come out of the recession.
The two main threats to businesses now seem to be imminent rises in interest rate, and the exchange rate.
Although we talk to one or two potential new clients a week (companies), very few of them are that sensitive to a base rate rise. If they had that much bank debt they would have folded earlier on in this current recession.
The issue seems to be centred around what effect a bank base rate rise will have on consumer confidence and resultantly, how much consumers spend. This does have a knock on effect.
Personal insolvencies did rise in number in 2014 and I think the base rate rise will have a much worse effect on individuals with mortgages, bank and credit card debt. They are a lot more sensitive to rises and we could see that figure rise further.
Lastly, the exchange rate and pound being worth more than the Euro may be good if you are going abroad on holiday, but not if you are a UK based manufacturer selling your goods abroad. In the last six months your products have got 10% more expensive to foreign buyers.
David Kirk – Licensed Insolvency Practitioner