Businesses are holding their nerve: UK insolvencies have fallen to a 17-year low

 
Lucy White
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Total underlying liquidations fell by 16.9 per cent on the previous quarter (Source: Getty)

The underlying number of businesses going insolvent in England and Wales has fallen to a 17-year low, according to the Insolvency Service's latest statistics.

Although the total number of company liquidations – where a liquidator is appointed to completely 'wind up' a business – increased by 14.6 in the second quarter, this was caused by a one-off event of 1,131 connected personal service companies (PSCs) slipping into liquidation due to changes to claimable expenses rules.

The actual underlying number, excluding the PSCs, saw total liquidations fall by 16.9 per cent on the previous quarter and by 3.5 per cent on the same period last year.

“This reflects the relatively stable period the economy is going through, with modest growth and low interest rates contributing to the statistics we see," said John Cullen of accountancy firm Menzies.

“Although the upward pressure on the interest rate has, for now, eased, at some point interest rate hikes will impact both businesses and individuals and the number of corporate insolvencies is expected to climb."

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

Sector breakdown

Including the PSC insolvencies, the administrative and support service sector saw the largest number of sinking companies, with 3,264.

But when the one-off effect of the PSCs was removed, the construction sector saw by far the most insolvencies with 2,615. This was a 2.3 per cent rise compared to the whole year of 2016.

Read more: More than a quarter of construction firms are at risk of insolvency as Brexit uncertainty weighs on the sector

"Pipelines for commercial projects are not as healthy as they were and the slump in construction generally is ensuring that the UK economy is not growing as fast as it could be," said Cullen.

The wholesale and retail trade along with repair of vehicles ranked below construction, followed by the accommodation and food sector and manufacturing.

The fewest insolvencies were in public administration and defence, with mining and quarrying, agriculture, forestry and fishing, electric and gas supply and water supply, sewerage and waste also ranking in the bottom five.

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