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Company failures on the rise

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6th Feb 2012
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Compulsory company liquidations climbed 14% in the final quarter of 2011, contributing to a 7.2% overall increase in corporate liquidations on the same period in 2010, the Insolvency Service reported.

Out of 4,260 liquidations in the quarter, 1,389 were compulsory and the company failure figures were boosted by another 658 administrations, 234 receiverships and 191 company voluntary arrangements. At 2,871, however, creditors voluntary liquidations were 5.1% down on the previous quarter, but up 3.4% compared to Q4 in 2010.

Insolvency Service statistics: Company insolvencies Q4, 2011

BIS insolvency statistics, Q4 2011

Frances Coulson, president of the insolvency body R3 commented thanks to historically low interest rates and HMRC time to pay arrangements, many companies were “zombies” that were surviving, but not thriving and predicted that some would eventually fail.

With insolvency numbers historically low compared to previous recessions, she predicted that the Q4 figures represented the “calm before the storm”.

“In fact if the economy is to recover, we must see some businesses fail, to allow viable ones to thrive,” she said.

According to R3 research, 29% of small and medium size companies were experiencing lower sales volumes and they were going to need more support during what is set to be a very difficult year.

Andrew Dixon, executive director for specialist finance at Bibby Financial Services, said that a lack of funding was one of the factors contributing to the rise in the number of insolvencies. The asset finance firm’s research showed that less than a third of businesses had applied for external funding during 2011, and only 4% had applied for government funding initiatives such as the Business Growth Fund or Enterprise Finance Guarantee.

 “The latest figures highlight the urgent need for a more effective approach to supporting businesses, particularly small and medium sized enterprises,” he said. In contrast to these schemes, asset-based funding approaches such as invoice finance was on the rise and helping businesses to improve their cashflow and liquidity.

“The financial services industry needs to work together in partnership with government agencies to develop much greater awareness of all the range of funding options that are available to support businesses in the UK and prevent the scale of failures we have seen with these latest insolvency figures.”

There were 28,973 individual insolvencies in England and Wales in Q4 2011. This was a decrease of 5.6% on the same period a year ago.

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By ksagroup
07th Feb 2012 13:01

Year on Year Show fall on 2010

It should be noted that year on year there has been a fall in the number of insolvencies.  There has been a slight increase in the last quarter but it is not a dead cert that insolvencies will rise next year.

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