Liquidations set to be highest since 1992: UHY Hacker Young

The number of companies entering liquidation in 2009-2010 is set to be the
highest since 1992, according to UHY Hacker Young.

The firm obtained figures from Companies House which showed 23,500 companies
went into liquidation in 2008 – 2009 , and this figure is expected to increase
to more than 25,600 for 2009 – 2010, a rise of 9%.

Liquidation is the process by which a company or part of a company, is wound
up and assets re-distributed, compared to an insolvency where a company is
unable to pay off its debt.

Nick Hancock, corporate recovery Partner at UHY Hacker Young, said: “Whilst
these figures are testament to the tough trading environment faced by businesses
over the last two years, we expect the rate of liquidations to continue to
accelerate.”

The predictions were based on 11 months of data up to February 2010.
Insolvency experts often warn of a lag between a return to growth and the fall
in company liquidations.

“In fact, liquidations usually peak as the economy emerges from recession,”
Hancock said.

It would be the largest number of liquidations since 1991/92, when the UK
started to emerge from the last major recession and 27,300 businesses were put
into liquidation.

There were more than five times as many company liquidations compared to
4,161 insolvencies last year.

“Many companies are choosing to throw in the towel and cease trading early
rather than hanging on until the bitter end and waiting until they are
insolvent,” Hancock added.

“Other business owners are voluntarily closing less profitable subsidiaries
in order to streamline and free up capital to support their core operations.”

Further reading:

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