Insolvency drop is a false dawn, says PwC

An unexpected drop in the number of companies collapsing in the last three months is not a sign that the economic gloom is lifting, PricewaterhouseCoopers has said.

The firm conducted its own analysis into corporate insolvencies and found that the number of corporate insolvencies in quarter two of 2008 actually fell by 3.1% from the first quarter of the year, but were up by 22% on the same quarter of last year.

According to PwC, 3,277 businesses across England and Wales entered into insolvency in April, May and June of this year. This number is down on the previous quarter, when taking into account seasonal trends but is still at a five-year high, the firm said.

Mike Jervis, partner in the business recovery services practice, said: 'Despite the small decrease in the figures this quarter, the numbers of insolvencies continue to rise on an annual basis at around 10%, as we predicted in January.

'We do think the numbers will continue to rise at least at this rate throughout the year. Firstly because there are an increasing number of companies in work-out and, secondly, because many management teams have not been through a downturn before. We recommend that they re-think their scenario planning, if necessary on a worst case basis, to manage through the downturn.'

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