Brexit poses biggest risk of business insolvency

ICAEW surveyed those working with the insolvency and business restructuring sectors on what would be the three greatest threats to British businesses over the next two years. Overwhelmingly, the responses ranked the impact of Brexit as number one.

The next two years will bring significant challenges to UK businesses, many of which may succumb to insolvency as a result. ICAEW conducted a survey of those working with the insolvency and business restructuring sectors and asked what they felt would be the three greatest threats to British businesses over the next two years. Overwhelmingly, the responses ranked the impact of Brexit as number one (73 per cent), followed by rise in interest rates (56 per cent), and attitudes of HMRC and banks as creditors (43 per cent).

“We are in no doubt that businesses in the UK face difficult times ahead. A sharp and unexpected rise in the cost of doing business can make managing liquidity tough. We believe that a change in attitudes is critical in order to successfully avoid substantially increased corporate insolvencies – confronting business issues, rather than being ashamed of them,”Bob Pinder, ICAEW regional director, said. “Seeking the early help of restructuring and insolvency practitioners enables restructuring of finances, business processes or management to salvage many businesses and bring them back into profit.  There is no shame in admitting you are struggling – getting help is the bold and right decision.”

Certain industries are expected to be hit the hardest. When asked what sectors were most likely to face increased financial difficulty it was widely agreed by over three quarters of respondents that the retail sector would be significantly challenged, with potential interest rate rises and the unknown consequences of Brexit looming.  Over two thirds of respondents felt care homes would be challenged, with similar consequences for the healthcare sector, which 44 per cent felt would suffer.

“The difference between businesses that survive and thrive and those that fail is how well they manage difficulties.  Whilst a percentage of insolvency is unavoidable, many cases are not. Owner/managers must know where they are on the decline curve – help must be sought early as they move beyond underperformance into a period of stress, before they reach crisis point,” Pinder added. “If they do so, it is possible to move away from insolvency, towards crisis management, stabilisation and finally onto recovery.”

https://staging.growthbusiness.co.uk/my-credit-controllers-a-new-app-checks-if-a-business-is-still-trading-2552536/

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.