McTear Williams & Wood

The number of failing businesses is still falling

Business failures in East Anglia in the three months to the end of March 2010 continued to fall for the fourth quarter running.  The number of company failures in quarter one 2010 in East Anglia was down 13pc on the previous quarter compared to a 10pc drop nationally.  A comparison of quarter one 2010 with quarter one 2009 shows company insolvencies fell 53pc in East Anglia, compared to 30pc nationally.

Corporate insolvencies in East Anglia peaked in quarter 1 2009 and have fallen steadily ever since, to the point where, today, the number of insolvencies across East Anglia is only 24pc higher than pre credit crunch levels.  This compares to an increase of 48pc nationally.  So the East Anglian region appears to be suffering less than the rest of the country.  However the picture across each county is mixed.

• Norfolk has actually increased quarter on quarter by 43pc.  With an index of 182, it is currently the worst hit county in the region.  This is in marked contrast with the picture in quarter 4 2009 when Norfolk appeared to be doing better than other counties and serves to show how patchy and fragile the 'recovery' is.
• Suffolk and North Essex has seen the biggest annual fall of 64pc in corporate failures having suffered worst in quarter 1 2009.
• Cambridgeshire with an index of 89, continues to outperform the national and other county indexes by a large margin.  The number of corporate failures if actually now lower than before the credit crunch. 

* index estimated at 100 in 2007
Data: All corporate insolvencies except compulsory liquidations as advertised in Stubbs Gazette and the public notices in the principal local newspapers.

The continuing fall in corporate insolvencies is encouraging, but there is no room to be complacent.  The UK economy will face huge challenges as the new government wrestles with the budget deficit and the UK's major trading partners in the Eurozone have to address sovereign debt issues.  Whatever happens to the current recovery, with business insolvencies expected to lag the general economy by 18 months and HM Revenue and Customs taking a harder line on repeat requests for "time to pay" arrangements, we expect insolvency figures to rise again later this year.  The danger for businesses that have suffered the recession is that as the "green shoots" of recovery are seen, if lending standards continue to tighten, many will not be able to fund expansion.

It is at such times that the focus needs to be on keeping cashflow forecasts constantly updated.

Eastern Daily Press
26 May 2010