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Insolvency levels show upturn in downturn

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UK insolvencies have risen sharply in the past quarter as the recession starts to hit small businesses. But the headline figure is distorted by one group that accounted for 729 separate managed services businesses that all went into administration.

There were 4,607 compulsory liquidations and creditors' voluntary liquidations in England and Wales in the fourth quarter of 2008 - up 11.9 per cent on the previous three months and 51.6 per cent compared to the same period a year ago.

For the whole of 2008, that equates to one in every 150 companies going into liquidation.

There were 2,428 other corporate insolvencies in the fourth quarter - 261 receiverships, 2,018 administrations and 149 company voluntary arrangements. In total this was a huge 220 per cent increase on the last quarter of 2007.

But the figures are not all they seem. An Insolvency Service spokesman told The Reg: "These figures are distorted because of a big increase in firms going into administration. In fact, 729 companies, out of 2,018, were all related to one group." BDO Stoy Hayward lumped all the companies, rendered inefficient by changes to tax law, into one administration process.

In England and Wales 29,444 people became insolvent in the fourth quarter of 2008 - up 18.5 per cent on last year. These were made up of 19,100 bankruptcies - up 22.2 per cent - and 10,344 Individual Voluntary Arrangements - up 12.2 per cent.

For the whole of 2008 there were 106,544 individual insolvencies, which was about the same as in 2007 and equates to one in 400 people. More numbers from the Insolvency Service here.

John Wright, National Chairman of the Federation of Small Businesses (FSB), said:

"These figures show a worrying trend for small businesses, which are facing rising costs and a decrease in trade. Small businesses are doing all they can to survive the recession and hold on to their staff. Over 40 per cent of small businesses believe that they are the sector to help pull us out of recession.

"We predict that up to 120 small firms will go to the wall each day so the Government needs to step up and help. Time is of the essence for small businesses confused by legislation and burdened by time and cost in implementing it. The FSB calls on the Government to put a halt to new and amended legislation in April to help small businesses concentrate on holding onto staff and staying alive during the downturn.

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