Member Article

Corporate insolvencies fall at 2012 close

Corporate insolvencies in the fourth quarter of 2012 were 14.2% lower than the same period a year before, figures from the Insolvency Service show.

There were 1,007 corporate insolvencies, comprising 276 receiverships, 580 administrations and 151 company voluntary arrangements.

The number of transport, storage and communication businesses entering administration jumped by 50% on the previous quarter, and the hotel and restaurant sector also suffered with an increase of 29%.

Real estate saw a drop of 20% in administration appointments on the previous quarter, and a 43% fall on the same period in 2011.

Mark Firmin, KPMG’s regional head of restructuring, commented: “While it’s good news that the overall number of businesses entering insolvency has dropped, the figures reveal that certain sectors are still struggling and remain under unrelenting pressure.

“The hotel and restaurant sector is being hit particularly hard by depressed consumer spending as people tighten their belts and chose to stay home rather than splurging on a meal or weekend away. Unfortunately this trend is likely to continue for the next quarter, as people concentrate on paying off their debt after spending at Christmas.

“Transport operators are also being hit by a knock on effect from troubles in other sectors. While high profile administrations dominate the headlines, it’s easy to forget their suppliers, such as haulage companies, are always badly affected by the demise of retailers like HMV and Blockbusters.”

Tracy Ewen, managing director, IGF Invoice Finance Ltd, said: “This morning The Insolvency Service reported that the last three months of 2012 saw a 3.3% decrease in corporate insolvencies on the previous quarter, and 10.7% less than the same quarter a year ago.

“Regardless of what the statistics say, they fail to reveal the entire insolvency picture. This is because many SMEs find that the costs and complications associated with registering as insolvent are too high and as such, choose the easier option of ‘ceasing to trade’.

“The cost of formal insolvency for small businesses is a minimum of £5,000 and often significantly more. Some businesses may also wait until a creditor winds them up or the Government shuts them down as a result of not having filed accounts for several years – again, this is behaviour that could really be skewing the insolvency statistics.

“With many banks still reluctant to lend to SMEs, small companies who are struggling with their finances are simply choosing to shut up shop and walk away from their commitments. At IGF, over the past few years we have found that ‘cease to trade’ has become more and more common amongst UK SMEs. This is something that does not show up in any of the insolvency statistics and is bad news for both creditors and businesses alike.”

This was posted in Bdaily's Members' News section by Tom Keighley .