Insolvency stats show corporate liquidations drop

The number of liquidations has declined, Q3 insolvency figures show, but
personal insolvencies continue to break records as the economic storm claims
more casualties.

In total, 6,114 businesses across England and Wales entered into insolvency
in July, August and September of this year.

However, compulsory and creditors’ voluntary Liquidations were down 4.7%
compared with the previous quarter but a rise of 14.6% on the same period a year
ago.

Other insolvencies rose for corporates’ with 410 receiverships, 974
administrations and 194 company voluntary arrangements which represented an
overall increase of 9.3% on Q3 2008.

Personal insolvencies broke the previously set record with the overall number
of 35,242. This comprised of 18,347 bankruptcies 12,390 individual voluntary
arrangements and includes the new debt relief orders, which saw 4,505 in the
third quarter of 2009.

Experts from the industry predict company insolvencies falling will precede a
delayed reaction, following HMRC’s deferred tax payment olive branch.

Brian Johnson, insolvency partner at HW Fisher, said: “The 4.7% decrease in
compulsory and creditors’ voluntary liquidations may reflect the summer lull but
may also be a result of the reduction in the number of insolvencies instituted
by HM Revenue & Customs, as the government tries to support businesses,”

“However, this relaxed attitude by the HMRC is expected to harden in the near
future and this will have a significant impact on the number of insolvency
petitions being issued,” he added.

“There is talk that the recession will technically end in the fourth quarter,
but for some companies the recession will really hit home when the Revenue calls
in its debts,” said Alan Tomlinson, partner at Tomlinsons.

Liz Bingham, UK and Ireland head of restructuring at Ernst & Young,
said: “Low interest rates and a recuperating economy helped to lower the rate of
corporate insolvency in the third quarter of 2009, but this isn’t the whole
story.

“In the next two quarters, companies will begin reporting a full year of
below-average growth, which will sorely test covenants at a time when banks will
have rebuilt capital and will be freer to act,” she added.

Andrew MacCallum, MD at Alvarez & Marsal, added, “Businesses that have
teetered on the edge all year are in danger of toppling over. Many are still
struggling to pay down debt and will not be granted extensions forever.

“Prematurely-confident companies will restock too quickly and will be left
high and dry as demand fails to materialise.”

Further reading:

Q2 insolvency stats reflect misery of UK economy