Insolvency drop is a false dawn, says PwC

Insolvency drop is a false dawn, says PwC

Big four firm warns that tough times still lay ahead despite indications of companies weathering the hostile economic climate

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.’

Further reading:

US
chapter 11: businesses must change

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