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Brexit could lead to a sharp upturn in the number of businesses filing for insolvency, according to a new survey from the Institute of Chartered Accountants in England and Wales (ICAEW).
The survey of accountants in the insolvency and business restructuring sectors concluded that Brexit was ‘likely to drive up business insolvency rates’.
The survey asked respondents to name the three biggest threats to British businesses over the next two years. An overwhelming majority (73%) ranked Brexit as the number one factor, followed by rise in interest rates (56%) and the attitudes of HMRC, banks and creditors (43%).
The survey comes at a time when small business confidence is plummeting and business lobby groups are putting pressure on the government to push through a transition deal.
Small business confidence, as measured by the Capital Economics on behalf of Amazon has slumped in recent months, as an index of business optimism dropped from +5 in September 2016 to -13 last year and -22 this month.
This drop in confidence prompted five major business lobby groups to sign a strongly-worded letter to the Brexit secretary, urging him to speed up negotiations on a transition period to take effect from March 2019 when the UK officially leaves the European Union.
The groups warn that a clear and swift transition deal is necessary to protect investment and jobs in the UK.
Bob Pinder, a Regional Director of the ICAEW, said: “We are in no doubt that businesses in the UK face difficult times ahead.”
He continued: “A sharp and unexpected rise in the cost of doing business can make managing liquidity tough.
“We believe that a change in attitudes is critical in order to successfully avoid substantially increased corporate insolvencies – confronting business issues, rather than being ashamed of them.”
In some circumstances, directors may take the view that it is in the best interests of the company and creditors to continue trading out of difficulties. But this is a risky strategy and it is recommended to take specialist advice before pursuing it.
If you have any concerns or need additional advice, please contact a member of our experienced debt management team today. Call: 0800 611 8888.