Hard Brexit would cause insolvency pile-up, insolvency bods warn

Firms that have gone under since 23 June already commonly blaming the 'B' word, research by trade body R3 finds

UK firms that have gone bust since June are often citing Brexit as a factor behind their demise, insolvency practitioners (IPs) say.

Some 45 per cent of IPs questioned by trade body R3 said Brexit has been mentioned by businesses seeking their help since the referendum.

In addition, 30 per cent questioned said they have seen a rise in firms seeking their advice since 23 June. Of this, a fifth (21 per cent) said Brexit has been a significant factor and a further 57 per cent said it was at least mentioned as a factor.

UK company insolvencies have generally been decreasing since 2008 but rose slightly in Q3, both annually and sequentially, according to the Insolvency Service (see graph below).

The findings echo misgivings about Brexit expressed by a spate of UK resellers to have released annual results in recent months.

CDW UK referenced the "substantial uncertainty" surrounding the vote in its most recent accounts, while another US-based VAR - Zones - admitted in recently filed UK numbers that a post-Brexit marketplace "will lead to more challenges" as it expands across the EU.

Meanwhile, Alternative Networks, a £140m reseller that was acquired by Daisy last month, warned in September that its 2016 numbers would miss expectations after the Brexit vote caused project delays.

Seventy-two per cent of the 364 IPs that R3 quizzed in November said they believed the referendum result will cause corporate insolvency numbers to rise by the end of 2017.

But they are much more concerned about the possibility of a "hard" Brexit - which would see the UK exit the single market - with 37 per cent predicting such a scenario would lead to a ""significant increase" in corporate insolvencies, compared with just one per cent for a "soft" Brexit.

Andrew Tate, president of R3, said: "The insolvency and restructuring profession is concerned about the impact leaving the EU will have on the financial health of UK businesses. Even before leaving, the effects of Brexit are being felt: a suddenly weaker pound and increased business uncertainty are already causing problems.

"Insolvency practitioners are on the frontline when it comes to supporting struggling businesses, and a significant minority say they have seen an increase in businesses needing help since June. Brexit is frequently coming up as an issue when businesses seek advice."