Insolvency figures show drop in business failures
A sign of the country's return to health came with a cautionary warning after new data showed corporate insolvencies had dropped nearly 20pc compared to last year.
Data released by the Insolvency Agency showed the total number of firms going into liquidation as up 0.5pc to 4,080 in the second quarter of this year compared to the previous quarter, but down 19.1pc on the same period last year. The number of firms going into administration was down 0.7pc down on the previous quarter and down 24.3pc on the same quarter last year. However, the figures also showed the number of firms seeking CVAs - Compulsory Voluntary Arrangements - was up by 13.7pc on the previous quarter and by 47.8pc compared to the same period last year.
Matt Howard, a corporate recovery partner at the Gorleston base of corporate recovery partner for accountants and business advisers PKF, warned that the worst effects of the recession were still to come. Their figures, not seasonally adjusted like the Insolvency service showed the rise in total liquidation to be down 2.4pc on the previous quarter. He said that the region was better off than many because of its strength in the financial and agricultural sectors and the boost to its holiday trade brought about by the trend towards “staycations”. But he feared that many small companies were hanging on by a financial thread.
“They have probably been helped because banks are currently willing to let customers simply service interest costs rather than repay capital,” he said. “If they pull the rug, it would leave them with huge write-offs so what they are getting is better than nothing.
“But the banks will become more aggressive again once confidence is restored in them and even though there is a great deal of corporate insolvency I would expect the numbers to get worse before they get better.”
Regional figures, due to be released in next Wednesday's EDP Business supplement, are expected to show that the region fared better than the national figures in corporate insolvencies.
Andrew McTear, partner at McTear Williams & Wood which compiles the local data, said an early indication was that in East Anglia corporate insolvencies were only up 14pc from pre credit crunch levels.
Chris Williams, also a partner at the firm, and eastern region council member for the insolvency trade body R3, said: “This recession has been atypical and businesses can't afford to be complacent.
“We would expect corporate insolvencies to rise after a recession as they did in previous recessions, but the figures only show a 0.5pc increase in company liquidations from the last quarter. We suspect these greater increases in corporate insolvency may not show until the end of this year or next.”
He said factors would include the Time to Pay scheme, which allows struggling businesses to defer their tax payments, and historically low interest rates keeping the cost of servicing debt relatively cheap.
Eastern Daily Press
7 August 2010
