Business insolvencies reflect wider economic trends

Recent company insolvency figures are reflecting wider economic trends.

The data, from The Insolvency Service, shows that there were 4,242 compulsory liquidations in total in England and Wales in Q3, up 0.1 per cent on the previous quarter – an increase of 6.5 per cent year on year.

Commenting on the increase, Clive Lewis, head of enterprise at the Institute of Chartered Accountants England and Wales (ICAEW), said: “These latest statistics show that businesses are not out of the woods yet – far from it. With signs of distress increasing across key economic indicators the prospect of a double dip recession looks more likely.”

However, R3 – the Association of Business Recovery Professionals claim that insolvency figures remain historically low compared to the levels seen after previous recessions, due to the value of business assets being too low for creditors to pursue.

According to R3 president Frances Coulson: “When the economy begins to enjoy a period of sustained growth we are likely to see creditors being more aggressive in their pursuit of debtors,” suggesting that there may be a further increase in company insolvencies,

He adds: “While current stresses may not be enough to push businesses over the edge, a prolonged period of distress will trigger an increase in formal insolvencies. The first few years after a recession are traditionally difficult as it will take some time for businesses to sufficiently rebuild their reserves to support expansion.”

Meanwhile, company insolvencies in Scotland were marginally lower than last quarter, but 42.9 per cent higher year on year.

On a positive note, personal insolvencies in England and Wales were down 11 per cent year on year according to the same statistics.