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UK: Insolvency Service reports fewer business failures during final quarter of 2012

16:06 01 February 2013

Shay Lettice of Peters Elworthy & Moore, east region chairman of R3

Shay Lettice of Peters Elworthy & Moore, east region chairman of R3

Roger Adams Photographer 2011

BUSINESS failures during the final quarter of 2012 showed a sharp fall compared with a year earlier, figures from the Government’s Insolvency Service showed today.

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Company liqudiations, both compulsory and voluntary, fell by 10.7% compared with the last three months of 2011 to 3,834.

The number of companies entering administration was 11.9% lower at 580, receiverships fell by 14.9% to 276 and company voluntary arrangements were 20.9% down at 151.

With the exception of companies entering administration, the totals were also down compared with the third quarter, despite the Office for National Statistics’ recent estimate that the UK economy slipped back into negative growth during the final three months of 2012.

Personal insolvencies also fell during the final quarter to 25,302, 12.9% down compared with the same period a year earlier.

Shay Lettice of accountancy firm Peters, Elworthy & Moore, who is eastern region chairman of R3, the organisation for insolvency professionals, said the figures on business failures were welcome news amid fears of a “triple dip” recession.

“Low insolvency rates are good for employment, and our relatively flexible insolvency regime has allowed many insolvent businesses, especially in the retail sector, to emerge from administration with some jobs or stores intact,” he said.

However, he added that while the numbers on personal insolvency were encouraging they only represented part of the picture as they did not include informal insolvency procedures, such as debt management plans, or those who had averted insolvency only by resorting to taking out payday loans.

Mike Jervis, business recovery partner at PricewaterhouseCoopers, said the drop in overall company insolvencies was down to “low interest rates, supportive lenders and frankly the lack of options if insolvency actually occurs”.

However, he warned that the position could change quickly, added: “Administration numbers ticked up 6% quarter on quarter and January has produced a number of high profile failures.

“Management teams are far more focused on cash, costs and survival than in previous downturns and continuation of these disciplines is not optional.”

James Money, corporate recovery and insolvency partner at PKF, said: “As we have seen during the first few weeks of the year, the high street is having a difficult time and the construction sector is under pressure as well. We’re also starting to see more business failures in the professional and financial services industries.”

He added: “Given little sign of any meaningful economic recovery, we do not expect the figures to maintain their downward trajectory for much longer.”

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