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Did a rise in CCJs affect the number of business closures in the UK in 2016?

It was a difficult, brilliant and weird year for business in 2016 with the uncertainty surrounding politics and the economy dominating the headlines. As a result, some businesses struggled through the year whilst others thrived, particularly those which export their goods.

The recently released statistics from Creditsafe show how difficult a year 2016 was for many businesses across the country. The figures are not great reading for many but they showcase the rise of legal proceedings, such as CCJs, as a way to deal with money owed to a company.

CCJs will not have always resulted in business closures that took place last year but they are indicative of difficult trading conditions. There was a small rise in the number of CCJs issued in 2016 with the value rising on average and totalling around £4865 per CCJ issued.

For the first time since 2013, the total value of CCJs issued in the UK hit over £300m; a rise from 2015 when the average value of CCJs issued dropped slightly. The professional, scientific and technical sector were issued with CCJs worth the most, at well over £17,000 on average; a big difference to the gas and electricity industry which received CCJs worth on average £2000.

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As the numbers of CCJs rose steadily throughout the year, there was still a reasonable number of new company start up’s across the country as levels were only down 1% on 2015. One of the biggest drops from 2015’s figures took place in Yorkshire where there were only 38,129 new businesses opening up.

It is good news that many were not deterred enough by an unstable economy to delay opening up their business. However, company closures were up by 24% with the majority of company closures taking place in quarter four, presumably due to the pressures of Christmas. For Yorkshire, the closure rate was the highest of all regions, up by 2800 on last year to 5722.

This rise in company closures was the first increase for the last three years prompting speculation about whether this will get worse once Brexit takes effect. The majority of closures took place for companies which were between 3 and 10 years old, followed by new start up’s ranging from a few months to 3 years old.

Administration, construction and wholesale/retail were the top three sectors for company closures in 2016. Construction has always been a notoriously volatile industry while wholesale may have lost out due to the fall in the pound making import costs rise significantly.

It’s difficult to conclude the effect last year’s rise in CCJs had on the closure rate of businesses but it is definitely worth noting how challenging a year 2016 was for so many businesses. With bad debts and late invoice payments growing again in 2016, an emphasis on alternative finance and business debt repayment solutions such as company voluntary arrangements (CVAs) may be necessary to help these small businesses survive and thrive.

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