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Corporate insolvencies at five-year low


Report notes 986 corporate insolvencies over Q3 2012

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Corporate insolvencies in England and Wales dropped to their lowest level in the third quarter of this year since the end of 2007 according to the Insolvency Service.

Its report released on Friday records 986 corporate insolvencies over the stated period; the lowest since the fourth quarter of 2007 when a figure of 758 was recorded.

The latest headline figure comprised of 277 receiverships, 548 administrations and 161 company voluntary arrangements. This represented a net decrease of 21 percent over the corresponding quarter last year and a 25 percent drop on the previous quarter.

Overall, there were 3,971 compulsory liquidations and creditors’ voluntary liquidations in England and Wales in the third quarter on a seasonally adjusted basis. This was a decrease of 2.8 percent on the previous quarter and 6.6 percent less than the corresponding quarter a year ago, the Insolvency service said.

The headline figure included 1,092 compulsory liquidations; up 5.5 percent on the previous quarter but down 10.2 percent on the corresponding quarter last year. In addition, there were 2,879 creditors’ voluntary liquidations; down 5.6 percent on the previous quarter and 5.1 percent on the corresponding quarter of the previous year.

Nick O'Reilly, insolvency partner at HW Fisher & Company, felt the latest data was a break from the norm. "Insolvency figures have a habit of striking a bum note, even amid a chorus of positive economic news. But for once, this latest data is in tune with the economic growth and job creation seen in the third quarter,” he told CFOWorld.

"Total company liquidations have dropped to their lowest level for two years, hinting that as the recovery takes hold fewer businesses are going to the wall. But the numbers do not tell the full story. They fail to show the pressure which has built up in the system, as thousands of companies bump along the bottom, kept alive only by low interest rates, and frequently by their owners pumping personal savings into them,” he added.

According to O’Reilly, industry evidence suggested that struggling companies are taking on work at below cost, simply to keep the cash coming in. However, he added that such moves merely delayed the inevitable.

"Of course such unproductive and loss-making companies are dragging down the economy as a whole, and can only defy business gravity for so long. However there are signs that some of these zombie companies are finally being put out of their misery, as compulsory liquidations have risen since the last quarter," he concluded.

On a related noted, the Insolvency Service also said that personal insolvencies in England and Wales rose marginally to 28,062. The figure represented a 2 percent rise from the second quarter of the year but was lower by 7.2 percent over the corresponding quarter last year.

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Corporate insolvencies at five-year low
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