Yorkshire sees a sharp rise in insolvencies

BUSINESS failures across the region are rising dramatically and are set to increase at a worrying level, say PricewaterhouseCoopers.

According to research by the accountancy firm although the number of corporate insolvencies in Q3 only rose by 35% from Q2, the figures were up 65% on last year.

In total, 479 businesses across Yorkshire and North Lincolnshire entered into insolvency in July, August and September of this year compared to 355 in the previous quarter.

The findings are being published on the day national insolvency statistics are announced by the Government.

The PWC report found that the construction sector was struggling the most with 81 insolvencies in Q3, followed by manufacturing (66) and retail (53).

At a national level, numbers of construction and manufacturing insolvencies also remained high with 537 construction and 502 manufacturing insolvencies in the last quarter.

However, manufacturing numbers are still at a five year low on a 12 month rolling basis, which according to PWC demonstrates that the strength of the euro against the pound could be boosting the UK market’s attractiveness.

The quarter also saw a number of high profile high street retail administrations including Stead and Simpson and Dolcis.

Meanwhile, the number of retail insolvencies remained static on Q2 2008 with 437 companies going insolvent nationally – exactly the same as last quarter.

PWC also warned that now was not the time for retailers to relax as the squeeze on consumer spend was likely to make 2008 one of the toughest Christmases ever.

Analysis showed that London had the highest number of insolvencies in the quarter with 1,073 – a massive 54% increase on the same period last year and driven by the high number of retail and real estate insolvencies in the region.

The North and South generally seem to be weathering the storm in a similar way, with overall figures for the two sides of the UK being generally the same.

Wales and the North East and Cumbria were the only two regions to show a slight decrease in numbers, but both regions are still up 24% and 41% in the same quarter last year.

Steve Ellis, partner in the business recovery services practice at PWC in Leeds, said: “We predicted in the last quarter that the small decrease in figures would be the calm before the storm.

“A 65% increase on the same period last year shows that the lack of confidence and capital is now impacting a much broader range of the economy than we have experienced to date.”

However, Mr Ellis was upbeat in his analysis of the findings.

“Despite grabbing the headlines on an almost daily basis over the last quarter, insolvency is not necessarily viewed as a death sentence anymore and businesses are seeing that insolvency techniques can be used as a mechanism to salvage and revitalise ailing operations,” he added.

“Used in the right circumstances, insolvency procedures including pre-packaged administrations can help to rescue a company, saving jobs, and preserving value for the company and continuity for suppliers.

“Where rescue capital is a scarce commodity, it is obvious that the sooner problems are recognised, a solution, inside or outside an insolvency process, is more likely to be achievable. In this environment, downside scenario planning should always be on the boardroom agenda.”