Company liquidations up 56 per cent

Company liquidations up 56 per cent - 01/05/2009

There were 4,941 compulsory liquidations and creditors’ voluntary liquidations in the first quarter of 2009, a rise of 56 per cent on the same period in 2008.

Figures from The Insolvency Service reveal that these were made up of 1,579 compulsory liquidations, which increased 43.6 per cent from 1,100 year on year, and 3,362 creditors voluntary liquidations which soared 62.5 per cent from 2,068 in the first quarter of last year.

The report also shows there were 1,783 other corporate insolvencies in the first quarter of 2009 comprising 316 receiverships, 1,311 administrations and 156 company voluntary arrangements. These represented a rise of 54 per cent on the same period year.

The statistics also show that personal insolvencies in England and Wales were up 19 per cent in the first three months of 2009, year on year, to 29,774. These were made up of 19,062 bankruptcies, which increased 23 per cent on the first quarter of 2008, and 10,713 individual voluntary arrangements (IVAs) which were up 11.8 per cent by the same comparison.

Richard Fleming, UK Head of Restructuring at KPMG, said: "The jump of over 50 per cent on last year’s figures is a staggering reminder of how quickly the recession has knocked down many businesses in its path."

The manufacturing industry made up the second largest number of all insolvencies and saw a rise of 28 per cent in the last quarter (257 up from 201). Paper publishing and printing saw the largest increase at just under double last quarter's numbers (51 up from 28).

Fleming added: "Unfortunately we are seeing companies with nowhere else to go failing as their backers, realising that they are throwing good money after bad, snap the purse closed. The financial sticking plasters which were applied to struggling companies when liquidity was still available are now coming away and lenders are unwilling to reapply them.

"We expect to see the rate of insolvencies gathering pace over the coming months as the Darwinian theory takes effect in the corporate world. Interestingly the company voluntary arrangement (CVA) figures are fairly stagnant (156 compared with 149) but this could change with the approval of the JJB CVA. We may now see more compromise deals being struck between companies and their creditors to avoid insolvency."

This week figures from PricewaterhouseCoopers revealed that 5,483 organisations became insolvent in the first quarter of 2009, with trustees in the manufacturing, retail and construction sectors being hit the hardest.

Meanwhile, a survey of the UK’s insolvency practitioners by R3 said they expect a 31 per cent increase in personal insolvency by the end of 2009 compared with 2008. It gave a prediction of around 139,000 personal insolvencies for whole 2009 in England and Wales.

R3 President Peter Sargent said: "Today’s figures show the start of major rises in personal insolvency, which insolvency practitioners, those on the front line, believe will rise quarter on quarter this year. We know personal debtors usually take up to six months to seek a statutory debt solution and by the end of 2009 the figures will reflect this lag."

Source: Credit Today