The construction industry suffered the highest rate of insolvencies in 2016 as the effects of Brexit started to bite.
New research by KPMG found a general upswing companies entering into administration in the second half of 2016 following the Brexit vote.
The numbers, taken from notices in the London Gazette, show that 1,174 companies, or groups of companies, entered into administration across the UK during 2016, compared with the 15-year low of 1,111 in the previous year. The peak was seen in 2009, following the financial crisis, when 3,376 companies went into administration.
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The construction industry was particularly hard hit with 174 firms becoming insolvent. The sector was impacted as increasing costs for imported raw materials squeezed profit margins.
Other sectors that were prominent in the research included retailers (89 insolvencies), social care and nursing homes (19), and companies from within the hotels and leisure sectors (26).
KPMG’s UK head of restructuring, Blair Nimmo, believes ongoing uncertainty in the geo-political and economic environment, coupled with the depreciation of sterling, is now starting to be felt more keenly by businesses.
He said: “2016 was a game of two halves, with the first six months of the year continuing the downward trend in corporate insolvencies. However, numbers started to creep up in the second half of the year, no doubt in part a reflection of the uncertainty created by the result of the EU Referendum and the fluctuations seen in the currency markets.”
Looking ahead for the rest of the year, Nimmo said he expected the numbers of insolvencies to continue on a steady path.
“While there are many positive signs for 2017 including continued GDP growth, low unemployment and low interest rates, and increased order books in some sectors, I still sense a degree of uncertainty such that I suspect businesses will continue to adopt a cautious approach until matters become clearer after the triggering of Article 50.
“Inflationary pressures will also start to play their part. So while I do not foresee any sudden spike in insolvency numbers on the horizon, I would not be surprised to see the slight steady uptick in administrations continue over the months ahead.”
