Number of insolvencies fall in the second quarter, but retailers are still feeling the pinch

 
Lucy White
UK insolvencies fall
Jaeger was one retailer which went into administration in the second quarter (Source: Gordon Griffiths, Creative Commons)

The number of companies falling into insolvency has dropped in the second quarter of 2017, according to KPMG analysis, although retailers are still feeling the squeeze.

Across England and Wales, 280 companies entered administration from April to June compared with 327 in the first quarter and 294 in the same period last year.

But this slight relief may just be a “temporary blip”, according to KPMG's head of restructuring Blair Nimmo.

Read more: Insolvency Service ramps up investigation into collapse of BHS

“On the face of it, the latest figures seem encouraging and certainly reflect what we’re seeing on the ground, with much of our current work revolving around profit improvement, cost reduction and working capital management rather than insolvencies,” said Nimmo.

“However, we should not be lulled into a false sense of security, particularly as there are still certain hotspots which give cause for concern.

“Retailers, particularly those mid-range high street fashion brands, continue to battle in the face of increased competition, mounting cost pressures and a squeeze on household expenditure.”

Over the quarter, 27 retailers still slipped into insolvency including high street brands Jaeger, Joy, Jacques Vert and jeweller Theo Fennell.

Although this was down from from 31 in the previous quarter, the relativley high level is hardly surprising given the wider macroeconomic environment.

Although inflation was down in June for the first time in more than a year, it is still well above average earnings growth.

Read more: Gap between inflation and wage growth weighs on consumer confidence

Meanwhile, speculation remains around when interest rates might be hiked – a move which would pile the pressure onto consumers who are increasingly indebted.

“Additionally, adverse exchange rate movements are starting to impact on certain sectors, with businesses expressing concern over their ability to pass on additional costs to their customers,” said Nimmo.

This was one finding from KPMG's survey of chief executives, where 74 per cent of company leaders warned that inflationary increases meant they would have little choice but to pass on increased costs.

Read more: Retail sales rise in second quarter gives glimmers of hope to British economic growth

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