Experts say insolvency figures are a temporary lull

THE level of corporate and personal insolvencies both dropped in the third quarter of 2010, continuing the downward trend reflected earlier in the year.

However, experts from the region’s insolvency industry are predicting that in both cases this downward trend could soon be reversed.

Lindsey Cooper, partner at Baker Tilly’s restructuring arm in Manchester, said that stakeholders including Her Majesty’s Customs & Revenue “have been extremely supportive of businesses in the current climate”.

“They recognise that a company going into an insolvency process is ultimately more costly to all,” she said.

However, she questioned whether this support could continue indefinitely in an unstable economic environment.

“There is only so long such a stalemate can remain before patience runs out as further promises of repayment, in some cases, fail to materialise. We expect the impact of the spending review and the resulting fallout down the supply chain to emerge sometime next year as businesses continue to struggle with declining revenue streams.”

Similarly, RSM Tenon’s regional head of recovery, Chris Ratten, said that although reduced interest rates had led to corporate insolvencies falling to pre-credit crunch levels, there was still a lack of available funds.

“The danger of business failures facing a double dip is still very real,” he said.
“Rather than a return to the sharp spike that we saw in 2009, we are likely to see an extended period of above average company failures”.

The number of personal insolvencies in the region dropped 7% to 2,481.