Insolvencies: worst may not be over

A sign of the country’s return to health came with a cautionary warning yesterday 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 were 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 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 – Company 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 accountants and business advisers PKF, warned that the worst effects of the recession were still to come. Their figures, not seasonally adjusted, showed total liquidations 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 is 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 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.”

Eastern Daily Press
7 August 2010

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