Business insolvencies rise on winter gloom

The sun may be shining, but new figures from the Insolvency Service have cast a sudden shadow over the weekend...

by Emma Haslett
Last Updated: 21 Dec 2011
Just when we all thought things were about to get back on track, our hopes have been dashed: figures published today by the justice ministry’s Insolvency Service has shown that the number of businesses entering insolvency has risen. According to its figures, insolvencies have gone up in the last three months by 3.7%, to 4,121, which is an increase of 2% since the same time last year. Which won’t do much to brighten our weekends – particularly when you taken into account that every indication is that there’s worse to come…

A breakdown of the figures at least suggests there are a few redeeming factors. The biggest rise is in those going into voluntary liquidation – ie. creditors or suppliers haven’t demanded that they go into insolvency. That number rose by 9.7%, while those going into compulsory insolvency dropped, by 10%. Which at least suggests that businesses owners are keen to get their houses in order. The number of businesses going into administration, which tends to be the option of choice for larger firms, rose by 22% to 782.

You’d be forgiven for being a little confused, particularly when figures at the end of 2010 showed that insolvencies had begun to fall. But experts have pointed out that public sector spending cuts are beginning to take their toll – particularly on some Government suppliers, many of which make up the ‘bankruptcies’ category. And businesses were also affected by the combination of bad weather over Christmas, a period many retailers rely on to make up for poor sales during the rest of the year, and the rise in VAT, which caused consumers to tighten their purse strings.

And analysts have warned that there are likely to be further insolvencies over the next few months, as businesses continue to struggle with reduced consumer confidence. That should put a spring in your step as you head off for your Friday evening pint…

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