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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