Company insolvencies hit five-year low

Just 986 firms went bust in the third quarter of this year, new figures show. The lowest number since the end of 2007.

by Rebecca Burn-Callander

According to new data from the Insolvency Service, firms in England and Wales are juggling their finances rather better than earlier in the year. Just 986 went into administration, receivership or a company voluntary arrangement in the last three months, a drop of 25% on the previous quarter.

The number of compulsory liquidations and creditors’ voluntary liquidations has also fallen, down 2.8% on the previous quarter to 3,971. However, we’re still a far cry from pre-recession liquidation levels. Rewind the clock back to 2007, and there were around 1,000 fewer corporate liquidations per quarter.

Nevertheless, it’s a marked improvement on the insolvency figures from earlier in the year. ‘Insolvency figures have a habit of striking a bum note, even amid a chorus of positive economic news,’ says Nick O'Reilly, insolvency partner at the chartered accountants HW Fisher & Company. ‘But for once, this latest data is in tune with the economic growth and job creation seen in the third quarter.’

Of course, insolvency figures don’t give an entirely accurate picture of the health of British businesses. They don’t include the thousands of companies that are bumping along the bottom, surviving only because of low interest rates, the forbearance of the banks, and cash injections from their owners’ personal savings. These so-called ‘zombie’ companies are unproductive and unprofitable, dragging down economic growth.

Lee Manning, of R3, the trade body for insolvency experts, says, ‘Our research shows 146,000 businesses are in fact 'zombies', whereby at best they are able to pay the interest on their debts but not reduce the debt itself.’ And while a rise in the number of compulsory liquidations suggest that some of these are finally being driven to the wall, many more are still ‘running on empty’.

Image: BigStockPhoto

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