Administrations fall but CVAs increase in 2010

BUSINESS INSOLVENCIES fell for the third quarter in a row, but company voluntary arrangements (CVAs) increased.

CVAs increased in 2010 with 765 conducted compared to 726 in 2009. However, administrations totaled 2,835 for 2010 compared to 4,161 in 2009. Receiverships were also down 159 in 2010 compared to 2009.

Compulsory liquidations totalled 1,200 a 5.8% increase compared to the previous quarter, but a fall of 9.9% compared to the same period a year ago, according the latest Insolvency Service statistics.

Creditor voluntary liquidations were down 2.6% on the previous quarter to 2,755 but a drop of 11.8% on the same period a year ago.

There were 1,114 other corporate insolvencies in the fourth quarter of 2010. This figure was made up of 302 receiverships, 642 administrations, and 170 CVA.

Receiverships dropped 23.9% compared to the same period in 2009, as did administrations by 24.4% and CVAs by 22.4%.

"The downward trend for insolvencies must be a good thing for the UK economy on the face of it, but the figures are potentially misleading," said director of corporate recovery and insolvency at Carter Backer Winter, Carl Bowles.

"Most insolvency practitioners firmly believe there are a significant number of 'zombie' companies out there that in pre-recession times would have been put into a formal insolvency process led by the banks or HMRC, but which have been allowed to continue to trade as a result of policy."

Mike Jervis, business recovery partner at PwC agrees, adding: "Total numbers in the fourth quarter of 2010 fell by only 0.6% compared to the third quarter of 2010. This is not a welcome trend and highlights the ongoing uncertainty in the economy.GDP was negative last quarter and we are not out of the woods yet."