Good news for business owners: The latest stats from the Insolvency Service show the total number of companies who entered liquidation in 2014 was down by 6.3%.
So what can we expect this year? We have reviewed the current economic climate and here are our insolvency predictions for 2015:-
Insolvency predictions – what the figures mean for your business
Roughly speaking, the number of businesses who entered serious financial trouble last year reflected pre-financial crisis levels, however it took seven years to get to this point.
Without a doubt, we are witnessing an improving economy benefiting from low interest rates. Creditors and debtors are collaborating more actively on repayment plans to avoid the need to file for insolvency.
Businesses are able to grow quicker than they did during the recession.
Hence it is not a big surprise that the number of insolvencies is falling as the economy stabilizes.
Even though the statistics are encouraging, we should take them with a pinch of salt. As a recent reminder, City Link and Phones 4U went out of business at the end of 2014.
The retail and construction sectors are especially vulnerable. Many small businesses are forced to accept longer payment terms and offer low competitive prices to drive sales. As a result their cash flow suffers, and small businesses often find themselves first in the firing line.
It’s important to heed these warning signs but in general we are cautiously optimistic about prospects for the UK economy in 2015.
Booming domestic demand and growth of household income should be key forces behind a continued economic success, while low oil prices are likely to create an uplift in business activity.
As regards overseas expansion, there is minimal potential of increasing exports to the main trading partner, the weak euro zone.
We can also expect a serious impact on companies’ survival rate due to rising interest rates – however these may not be in place until the beginning of 2016.
As the UK economy is tightly linked to its housing market, instability in property prices can affect consumer confidence, making the public save more and spend less – which in turn will have a negative impact on small businesses.
Summing up – how to avoid insolvency in 2015
To sum up, we have quite positive predictions regarding insolvency in 2015, ie fingers crossed the lack of it!
There’s plenty of potential for growth and expansion throughout the next few months but careful planning is needed.
Oh yes, and there is the little matter of the General Election, the result of which might just have some effect on the economy at some stage.
But never be complacent. Focus on improving productivity levels, invest wisely to support growth and sustain competitive advantage and, if in doubt, always be strict with the cash flow!