Insolvency figures hit seven-year low

OFFICIAL insolvency statistics show the number of administrations has dropped to its lowest level for seven years.
 
The figures show there were 548 administrations during the third quarter of 2012 – the lowest since the beginning of 2005 and less than half the number in late 2008 and early 2009, when figures peaked at well over 1,000 per quarter.
 
There were 161 Company Voluntary Arrangements (CVAs) in the third quarter of 2012, down by 22% on the same period last year and the lowest for two years. There were also 277 receiverships in the third quarter, down by 26% on 2011 and the lowest since the end of 2008.
 
Jeremy Oddie, North West chair of R3 and head of recoveries at accountants Mitchell Charlesworth, said: “The drop in corporate insolvency numbers is reassuring, especially as it follows after last week’s figures showing that Britain has come out of the double-dip recession.
 
“However the figures hide the fact the fact that there are many other businesses stagnating – being kept alive by the banks, rather than being shut down as they would have been during previous recessions. Many larger businesses are undergoing a bank-led ‘workout’ and, as funding structures have become far more complicated, it is taking them longer to either recover or enter formal insolvency.
 
“Our recent research shows 7% of businesses in the North of England – equivalent to 22,000 firms – are struggling to pay their debts when they fall due and 10% would be unable to pay if interest rates rose. Some of these businesses have been ‘running on empty’ for quite some time now, and with no reserves left in the tank, they may not be able to carry on for much longer.
 
“We would urge these businesses to seek professional advice to lift them out of the ‘zombie zone’, enabling them to withstand unfavourable changes in circumstances and eventually take advantage of growth when it happens.”