Corporate insolvencies fall 1.8% on last year

by Rachael Singh

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04 May 2012

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Insolvency Service

CORPORATE INSOLVENCIES has fallen 1.8% on the same period a year ago, according to the latest government insolvency statistics.

Other types of corporate insolvencies saw a decline in the first quarter of the year, this was made up of 336 receiverships, 779 administrations and 175 company voluntary arrangements (CVA).

The Insolvency Service will have to republish its statistics as Accountancy Age reported a mistake in its calculations. The original document had incorrectly stated other corporate insolvencies had risen 1.8% for the first quarter of the year compared to the same period a year ago when in fact they have decreased by that amount.

Compulsory liquidations declined 11.1% on the previous quarter but increased 11.1% on the same period a year ago. Creditors Voluntary liquidations were up 5.7% on Q4 2011 and rose 1.8% compared to Q1 2011.

PKF's head of corporate recovery & insolvency Ian Gould said: "Although the figures make uncomfortable reading, my concern is that the situation will get worse before it starts improving. The statistics don't currently reflect the difficulties facing the corporate sector, and I'd expect to see a significant increase in business failures at some point during the next 12 months or so.

"We're still experiencing the calm before the storm. We've seen the economy enter what appears to be a double dip recession, the manufacturing sector is under pressure and there is no indication yet of any significant relaxation of the current financial squeeze."

His warning was echoed by HW Fisher & Company insolvency partner David Birne who cautioned that the worst is yet to come.

"The post-Christmas retail lull often makes the first quarter of the year a bloody one, as companies that limped through December finally keel over," he said.

"But there are still thousands of "zombie" companies which are stumbling on, as banks are reluctant to push all but the basket cases into insolvency."

Deloitte partner and insolvency trade body R3 president Lee Manning believes that companies are now seeing reduced sales and a fall in profits which will lead to increases in corporate collapses in the near future.

"R3's latest Business Distress Index found that 37% of businesses say they have seen a reduction in sales volumes and 36% say they are experiencing decreased profits, both up on the previous quarter. This indicates that corporate insolvencies may well rise," he said. 

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