Business failures will rise – warning

Business failures will continue to rise despite the beginning of the recovery, East Anglian insolvency practitioners warned yesterday as new figures showed the number of firms entering liquidation has risen to a 16-year high.

The latest figures from the Insolvency Service revealed that 19,077 companies went into liquation in England and Wales in 2009, the highest number since 1993.

But the number of business failures fell in the last three months of the year compared to both the previous quarter and the same period in 2008 – falling by 4pc and 3pc respectively.

There was also a dramatic fall in the number of companies entering administration in 2009 compared to 2008 – a 58pc drop year-on-year and the lowest number of companies calling in the administrators since the end of 2007.

Chris Williams, a partner at business recovery specialists McTear, Williams & Wood and eastern region councillor of insolvency trade body R3, said: “The latest insolvency figures for the fourth quarter of 2009 are significantly below most people’s expectations for business failures for this point in the recession, but we should not take this as a sign that the worst is over.

“The last few months of 2009 were consequently quieter than expected for insolvency practitioners as the government’s ‘Time To Pay’ scheme kept some businesses away from insolvency and banks broadly continued to lend their support. This has a knock-on effect on personal insolvency as jobs are preserved and incomes remain steady.

“We know from previous recessions that, although the overall economic outlook is brighter, this is the most dangerous time for businesses. They are often short of working capital to fund expansion and policy makers cut measures aimed at helping those in financial trouble. This week’s decision by the Monetary Policy Committee to hold interest rates at 0.5pc suggests they recognise the risk of a double-dip recession.”

Nigel Millar, restructuring and recovery partner at Baker Tilly’s East Anglia office, added: “While government officials may breathe a collective sigh of relief, they are not really in a position to rest on their laurels. All eyes should be on the financial impact for UK plc, as government funding support falls away and debt takes control.

“The dramatic 57.9pc fall in company administrations proves the backing Government has provided to UK plc over the last year.

“However, with the Bank of England calling time on the quantitative easing programme, HMRC’s toughening stance on ‘time to pay’ agreements and previously lenient landlords becoming harder in their rent demands, administrations figures will rise again.”

Eastern Daily Press
6 February 2010
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