KPMG market analysis pinpoints 5% rise in insolvency events during 2019

The number of companies falling into administration increased by just under 5% during 2019. That’s according to new analysis from KPMG. A study of notices in the London Gazette shows that a total of 1,403 companies went into administration last year compared to 1,341 in the previous year. The rise was driven by a spike in insolvencies in the third quarter of the year, during which 420 firms went into administration.

The final quarter of the year, however, saw insolvencies fall back to more typical quarterly levels, with 311 administration events between October and December. Notable cases included popular greetings card retailer Clintons, Toto Energy and fashion chain Bonmarche.

Blair Nimmo, head of restructuring for KPMG UK, said: “2019 was a year characterised by profound political and economic uncertainty, with consumer confidence remaining fragile and companies continuing to bear the brunt of rising overheads and increased costs. While many businesses battened down the financial hatches, adopting a prudent and cautious strategy, for some the challenging trading conditions proved to be a bridge too far.”

Nimmo continued: “Nevertheless, it’s certainly not apparent that we’re about to see an influx of insolvencies over the months ahead. December’s General Election result brought with it a degree of certainty, and business confidence seems to have responded positively. While certain sector-specific challenges remain, we would encourage companies to continue to focus on good financial housekeeping. They should keep a tight grip on cash and costs, focus on operational efficiencies and maintain a clear visibility over supply chains where events outwith their control can have a significant knock-on impact for a given business.”

Tough year for construction

Once again, the failure of a number of High Street names dominated headlines over 2019. However, despite a small increase in the number of retailers falling into administration in the final quarter of the year, the number of High Street names falling into administration over the full year actually fell sharply, from 170 in 2018 to 133 in 2019.

It was a tougher year for those in the building and construction industry, which saw 254 administrations compared to 216 in 2018. It was also a challenging year for companies across the UK real estate sector, which saw 69 administrations, up from 53 in 2018, with continuing pressure on activity levels and margins.

Nimmo added: “It’s certainly no surprise that we’ve seen an increase in real estate insolvencies over the past 12 months, particularly so when you consider two specific drivers of activity. First, companies that specialise and support residential property development and investment were significantly affected by persistent geopolitical and economic uncertainty. Of course, the demise and ongoing restructuring of a large number of High Street retailers is having a profound impact on commercial property income and values.”

In conclusion, Nimmo explained: “Capital-constrained landlords will struggle to adapt to the structural changes affecting the sector, which require substantial investment to implement re-purposing strategies. This is a trend we’re likely to see continue well into 2020 as the full impact of retailers’ store closures and estate rationalisation programmes take effect.”

About the Author
Brian Sims BA (Hons) Hon FSyI, Editor, Risk UK (Pro-Activ Publications) Beginning his career in professional journalism at The Builder Group in March 1992, Brian was appointed Editor of Security Management Today in November 2000 having spent eight years in engineering journalism across two titles: Building Services Journal and Light & Lighting. In 2005, Brian received the BSIA Chairman’s Award for Promoting The Security Industry and, a year later, the Skills for Security Special Award for an Outstanding Contribution to the Security Business Sector. In 2008, Brian was The Security Institute’s nomination for the Association of Security Consultants’ highly prestigious Imbert Prize and, in 2013, was a nominated finalist for the Institute's George van Schalkwyk Award. An Honorary Fellow of The Security Institute, Brian serves as a Judge for the BSIA’s Security Personnel of the Year Awards and the Securitas Good Customer Award. Between 2008 and 2014, Brian pioneered the use of digital media across the security sector, including webinars and Audio Shows. Brian’s actively involved in 50-plus security groups on LinkedIn and hosts the popular Risk UK Twitter site. Brian is a frequent speaker on the conference circuit. He has organised and chaired conference programmes for both IFSEC International and ASIS International and has been published in the national media. Brian was appointed Editor of Risk UK at Pro-Activ Publications in July 2014 and as Editor of The Paper (Pro-Activ Publications' dedicated business newspaper for security professionals) in September 2015. Brian was appointed Editor of Risk Xtra at Pro-Activ Publications in May 2018.

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