Company insolvencies fall in second quarter

In Q2 there were a total of 3,461 company liquidations, a 6.9 per cent fall compared with Q1 and a 15.1 per cent drop on the same time last year. This fall was particularly marked in creditors’ voluntary liquidations, which fell by 18.1 per cent year-on-year.

There were 410 administrations, a 19.2 per cent drop on the last quarter.

Graham Bushby, head of restructuring and recovery at Baker Tilly said: “In the past, we’ve seen an increase in corporate insolvencies as we have emerged from recession, but this isn’t the case this time around.

“There are many reasons for this, not least of which is the continued record low interest rates which have enabled many companies to struggle on despite serious underlying problems.”

The prospect of a future rise in rates could undermine this relative stability, but commentators are divided as to what extent this would be a problem.

Melissa Jackson, director of insolvency at Carter Backer Winter, said: “Insolvency practitioners that are still waiting for an avalanche of zombie companies to tip over into insolvency are searching for scotch mist. There is still an enormous amount of stagnation in the economy despite the new shoots of growth an optimism.

“A rise in interest rates may tip the balance for some struggling companies that are right on the edge, but it won’t change things for the majority. Businesses have got into the habit of surviving. An interest rate rise may make a tight situation even tighter, but the majority of businesses will continue to fight on.”

Bushby said: “Many of these companies – and particularly those who have been placed onto interest only deals with lenders – will have to brace themselves for rate rises over the next few years. For some, the gradual and limited rate rises promised by the Bank of England will be just about manageable, for others it will be the final straw.”

The figures also show a significant 5.1 per cent rise in the number of individuals becoming insolvent – driven particularly by individual voluntary arrangements, which grew by 20.3 per cent compared to the same quarter last year. One in 440 people was made insolvent in the past 12 months.

Jackson added: “The legacy of the 2009-2010 recession is still being felt by many. People who are trying to deal with their debts may see no light at the end of the tunnel after years of struggling and opt for ‘closure’ by entering into a formal procedure.”

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