Nerves jangle as insolvency figures jump 26%

The latest official insolvency figures paint a pretty gloomy picture of the state of the UK economy...

Last Updated: 31 Aug 2010

The Insolvency Service has just released its third-quarter figures, and they make pretty grim reading: 4,001 UK companies went into liquidation during the three-month period, a 26.3% increase on last year and a 10.5% jump from the previous quarter. Scarier still, the number of companies going into administration jumped by 50%, and the number appointing receivers shot up 238%. And as the Bank of England’s whopping rate cut highlighted yesterday, things are likely to get a lot worse before they get better…

Many of the companies that have gone to the wall will be SMEs, but this last quarter has also seen some high-profile collapses – notably Lehman Brothers, which according to Grant Thornton ‘may have a greater economic impact than all the other administrations put together’ (in which case it’s presumably miffed PwC got the gig). Worryingly for our ailing financial institutions, it also thinks we haven’t seen the last of the fall-out.

In total 1,007 companies called in the administrators between July and September, up from 668 in the same period last year, while 270 firms opted for receivership instead (last year’s figure was 80). There’s no question that it’s been a tough time for UK plc, with declining demand, higher commodity costs and a lack of bank finance all putting the squeeze on businesses of all sizes.

And with a deep and painful recession looming, the figures are only going to go in one direction: upwards. Grant Thornton’s Malcolm Shierson warned today that these ‘staggering statistics’ will continue to rise: ‘The turmoil in the financial markets over the last few months is now feeding through to the real economy, yet this is very much the tip of the iceberg. Genuine fears are now growing as to the depth and longevity of the impending recession. We predict significant increases in these figures in the next quarter and beyond.’ Cheery soul.

According to its latest estimate, the International Monetary Fund now thinks that the British economy will shrink by 1.3% in 2009, more than any other developed country – that’s 1.2% more than they predicted a few weeks back, so heaven knows how bad this figure will be by Christmas. If that happens, these insolvency numbers could be even more frightening by this time next year...

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