Insolvencies: “fear of worse to come”

A sixth consecutive fall in corporate insolvencies nationally was announced by the government’s Insolvency Service yesterday. 

But it could be “the calm before the storm”, according to regional insolvency firms.

There were 3,974 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the third quarter of 2010, said the Insolvency Service. This was a decrease of 2.2pc on the previous quarter and a decrease of 13.9pc on the same period a year ago. However, Chris Williams, of Norwich-based insolvency firm McTear Williams and Wood, said normal post-recessionary trends saw corporate insolvencies rise and warned this could be the calm before the storm.

“Current fiscal and monetary policies such as ‘time to pay’ agreements and low interest rates, coupled with a more supportive attitude from the banks, have kept numbers down,” he said. “These factors cannot remain with us forever, and we could be benefitting from a calm before the storm.”

Matt Howard, of accountants PKF, said: “I don’t want to be a purveyor of gloom but I fear there is worse to come. “With the ripple effect of government spending cuts and the January increase in VAT to follow, it could be an unhappy new year for many.

“Economic uncertainty seemed to ease in East Anglia during the summer, but we have seen in the last few weeks an increase in companies in difficulties, a situation mirrored nationally. “I think we will see more problems for the construction sector locally and for the leisure and retail industry as we go into its traditionally difficult post-Christmas period.”

R3, the insolvency trade body, has predicted an increase in corporate insolvency numbers next year to 27,500 – in 2009 the figure was 26,400. It says that across the UK nearly 400,000 businesses have relied upon delaying outstanding payments to the Crown, which could make 2011 a difficult climate.

Of the 3,974 insolvencies, 1,126 were compulsory liquidations (down 3.2pc on the previous quarter and down 12.6pc on the same period last year), and there were 2,847 creditors’ voluntary liquidations (down 1.8pc on the previous quarter and down 14.4pc on the same quarter last year).

Additionally, there were 1,141 other corporate insolvencies in the third quarter comprising 349 receiverships, 633 administrations and 159 company voluntary arrangements – in total a decrease of 27.7pc on the same period a year ago.
8 November 2010

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