Corporate insolvencies continue to decline

Corporate insolvencies in the UK have dropped for the second quarter running, according to the latest statistics from the Insolvency Service.

The latest figures for Q4 2009 saw 4,566 insolvencies including receiverships, administrations and company voluntary arrangements (CVA).

For the year 2009 there was a total of 19,077 corporate insolvencies, compared with just 15,536 for 2008.

The Insolvency Service breakdown shows that receiverships, administrations and CVAs represented a 39.7% decrease on the same period a year ago on a non-seasonally adjusted basis.

"The slight reduction in the level of company insolvencies is due to businesses developing strategies for dealing with the recession and the more tolerant attitude of the Revenue," said Alan Tomlinson partner at Tomlinsons.

"The flip side is that many of the businesses we deal with are accruing substantial liabilities to the Crown, which is only storing up problems for the future. Given the Government's requirement for funds, this tolerant approach is unlikely to last and pressure from the Revenue is likely to result in a second wave of failures during the course of the year," he added.

He is not alone in this thought process. Andrew MacCallum, managing director at restructuring firm Alvarez & Marsal said: "We can expect that special treatment from suppliers, landlords and the taxman will start to come to an end. Banks will lose patience and reinstate demanding payment terms. Creditors are more likely to send a company to the wall as assets are worth more in a growing economy."

Historically corporate insolvencies rise following the end of a recession, however Barclays managing director, for business support and recoveries, Graham Rusling, reassures companies that the banks will make a more "sophisticated efforts" to keep companies trading.

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