Company failures drop to four-year low

THE level of corporate administrations dropped to a four-year low in the first half of 2010, after falling by 43% compared with the first half of 2009.

The total number of corporate insolvencies fell to 1,065, which was 26% lower than the first half of 2006 – the last full year before the financial downturn began, according to analysis carried out by accountancy firm Deloitte.

In addition, Deloitte said that the number of administrations slowed in the second quarter of 2010, when it was 18% lower than in the first three months of the year.

Bill Dawson, a regeneration services partner in Deloitte’s North West division, said that the figures “paint a more positive picture” of the regional economy than many financiers feared and could provide a confidence boost to the corporate sector.

“The proactive approach adopted by companies and lenders alike has had a positive effect in most distressed situations,” he said.

“By acting sooner, companies have been able to remedy problems more effectively.  Equally, lenders, to date, have been comparatively supportive, preferring to make debt-for-equity swaps or even advance suitably priced risk capital, rather than crystallise their debt through an insolvency process.”

He added that the level of administrations dropped across all sectors, but said declines were most pronounced in retail (down 57%) property and construction (43%) and in manufacturing (47%).

“Manufacturing has experienced improved output and retailers have experienced a more buoyant six months with many retailers now picking up the market share left by those businesses that failed,” said Dawson.