LONDON (Reuters) - The number of companies falling into financial distress in England and Wales rose in early 2019, adding to signs that businesses struggled in the run-up to the original March Brexit deadline, official data showed on Tuesday.
There were 4,187 company insolvencies in the first quarter, up from 3,938 in the fourth quarter, the Insolvency Service said, citing seasonally adjusted data excluding “bulk” closures of companies set up by individuals for their personal affairs.
Most of these were creditors’ voluntary liquidations, when shareholders of an insolvent firm decide to close their company.
Britain had been due to leave the European Union on March 29 without a transition deal, dampening business investment and activity. The Brexit deadline date has since been pushed back twice, and it is now set for Oct. 31.
The number of companies entering administration, when accountants take over the management of an insolvent company to protect creditors, rose to a five-year high in the first quarter, the Insolvency Service said.
R3, an insolvency and restructuring trade body, said Brexit had a “particularly acute” impact on companies in early 2019.
“No-deal (Brexit) preparations put pressure on businesses to stockpile goods and materials, in turn putting pressure on their cashflow,” Stuart Frith, president of R3, said.
(Graphic - UK company insolvencies on the rise, tmsnrt.rs/2GV7264)
In contrast to businesses, consumer spending has supported Britain’s sluggish economy through the Brexit crisis.
A separate survey showed consumer confidence was steady in April, although households’ confidence in their finances declined.
The Insolvency Service said the rate of insolvency among individuals rose to 25.8 per 10,000 people in England and Wales during the year to March 2019, the highest level since the second quarter of 2012.
“Whilst retail sales figures show a sustained month on month growth throughout the first three months of 2019, it is likely that consumers’ renewed confidence in their spending power is aided by borrowing and consumer credit,” said Alec Pillmoor, personal insolvency partner at RSM.
Bank of England lending figures for March, covering consumers, housing and businesses, are due at 0830 GMT on Wednesday.
(Graphic - UK personal insolvency rate highest since 2012, tmsnrt.rs/2WcqpfL)
Reporting by Andy Bruce; Editing by David Milliken and Hugh Lawson