Another 4,500 companies go bust in Q4

The latest company insolvency figures are undoubtedly shocking. But they could be a lot worse.

Last Updated: 31 Aug 2010

Today’s insolvency figures show that 4,566 businesses went to the wall in the fourth quarter of last year - although the good news for glass half-full types is that this was a 1.1% fewer than in the same period in 2008. What’s more, the number of companies entering administration fell by almost 60%. Since personal insolvencies were actually up during the period, we assume this must be due, at least in part, to measures put in place to help businesses during the recession. But businesses be warned: both the HMRC and landlords are likely to get a lot less lenient towards the end of the year. So let’s hope the Government doesn’t just pat itself on the back and assume all the hard work is done.

In truth, the insolvency figures were a bit of a mixed bag. While insolvencies may have fallen towards the end of the year, the overall picture for 2009 was still pretty grim: 19,077 companies went bust, which is the highest figure since 1993, and amounts to nearly 1% of all active companies. And green shoots are still thin on the ground: compulsory liquidations were actually up 2.7% on the previous quarter. It was an even bleaker picture for personal insolvencies, which reached a record high last year as the recession pushed more people deep into the red. Across England and Wales, 134,142 people either went bankrupt, took out an Individual Voluntary Agreement (IVA), or Debt Relief Order in 2009.

Still, any fall in insolvencies has to count as a good thing. But how has it happened, given that the recession was still in full swing? Well, optimists might like to argue that businesses have become more savvy and developed strategies for dealing with economic hard times. But the experts seem to think it’s more to do with some of the measures put in place to help firms during the downturn, notably HMRC’s ‘time to pay’ scheme.

That’s good news, as far as it goes. But with the Treasury coffers looking decidedly bare, at some point the Government is going to want this money back. As Alan Tomlinson of specialist insolvency firm Tomlinsons points out: ‘The flip side is that many of the businesses we deal with are accruing substantial liabilities to the Crown, which is only storing up problems for the future. Given the Government's requirement for funds, this tolerant approach is unlikely to last, and pressure from the Revenue is likely to result in a second wave of failures during the course of the year,’ he warns, cheerfully.

In other words: corporate insolvencies may be down for now. But if the doom-mongers are right, there may be more bad news to come.

In today's bulletin:

British Airways' latest losses 'only' £50m
Waitrose sales up 15% in the last six months
Another 4,500 companies go bust in Q4
Exclusive MT survey: We're getting a fair deal from our banks, say SMEs
Psychology at Work: Time for some optimism

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