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Insolvency stats reveal the type of British businesses most likely to go bust

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The government has published statistics revealing the size and profile of companies most likely to go bust.

According to the latest available annual figures, the combined turnover of enterprises entering insolvency in 2017 was estimated to be £23.4 billion, with 187,000 workers affected.

Enterprises aged between four and nine-years-old, or with turnover of between £500,000 and £1m, or employing between 20 and 49 staff, had the highest rate of insolvency, according to the figures.

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Restructuring body R3 said businesses that fit these brackets tend to be reasonably well-established, but it’s at this point that things can come unstuck.

Duncan Swift, vice-president of R3, said: “The economies of scale enjoyed by very large companies aren’t necessarily there, while these companies aren’t as nimble as smaller counterparts. Fixed costs will be much harder to deal with.

“Companies trying to expand encounter unique difficulties. Founders may struggle to ‘let go’ and trust new management. New locations might not work, or new products may not perform as well as expected, despite significant investment. For fast-growing companies, the back office processes tend not to keep up with sales: a company may have a popular service or product, but the credit management or HR structures haven’t kept pace.”

Mr Swift said that finance remained an obvious issue for many growing companies due to the difficulties access new funding and working capital.

“Companies are most commonly facing insolvency when they’re four to nine-years-old. This could be a mix of different types of company: start-ups who have burnt through cash and investor or lender patience, or companies who have tried to take the next step and got ahead of themselves.”

More enterprises entered an insolvency procedure in London than anywhere else in 2017 but insolvency rates were highest in Yorkshire and Humberside and elsewhere in the North.

“While London has the highest share of insolvencies in England and Wales – thanks to the sheer number of enterprises based or headquartered there – it’s in the north where companies are at greatest risk of insolvency,” added Mr Swift.

“This could be down to a lack of infrastructure relative to London and the South East, or a lack of investment. The government has made a point about boosting the Northern economy, but there is clearly still a long way to go.”

Tags : businessinsolvencyONS
Andrew Seymour

The author Andrew Seymour

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