Business failures fall 9% in West Midlands

THE number of businesses going bust in the West Midlands has dropped by 9% over the last six months, new figures have revealed.
 
According to latest figures, the number of UK corporate insolvencies has steadily fallen throughout 2012. While the West Midlands is no exception – it falls short of the national picture, which shows a 14% reduction in the number of corporate insolvencies across the country.
 
In the third quarter in the West Midlands, there have been 470 insolvencies compared to 519 in Q2 – a fall of 9%. The total number of failures in the West Midlands in 2012 so far is 1572, equal to 9.26% of the UK’s insolvencies.
 
Nick Lee, director at RSM Tenon’s Birmingham office, said: “Corporate insolvency figures have made pretty miserable reading over the last few years and like most barometers of economic health there has been little to cheer about. However, in the last few quarters, insolvencies have actually been decreasing.”
 
In Q1 2012, insolvencies reached 6,000 but in Q3 levels have reduced nationally to just below 5,000. On the face of it, Mr Lee said this sounded good but businesses are still facing ongoing problems which are being masked by the current low interest rates.
 
“Many business owners are only just surviving, teetering on the edge, just covering the interest on their debts and their future is dependent on their creditors’ forbearance,” he added.
 
If these ‘zombie businesses’ were hit with unexpected costs; reduced orders, bad debts or increases in working capital this could actually push them over the edge – meaning many are in a very precarious position.
 
“Growth in the UK economy remains flat and we are still living in highly uncertain times. The threat of an unprecedented ‘triple-dip’ recession is never far from everyone’s minds, despite the economy showing it has officially grown out of recession.

“Fiscal austerity, higher energy prices, credit constraints and the ongoing Euro crisis, are all presenting significant downside risks to the UK economy. The private sector needs to be supported by government as it is expected to deliver growth and investment so credit conditions need to be improved or the recovery will stop before it has begun,” said Mr Lee.