Partner Article

Insolvencies on the up

The latest statistics from the Government’s Insolvency Service has revealed a 9.1% increase in compulsory liquidations across the North East last year.

In 2008 there were 186 compulsory liquidations, however last year the figure rose to 203. The figure compare unfavourably with other large cities in the north of England.

During the same period, the number of compulsory liquidations remained the same in Leeds and actually fell in Manchester.

A compulsory liquidation occurs when the company cannot actually pay off the money owed to its creditors. The process is started by the company itself, a creditor or a governmental body.

Mark Ranson, partner at the Newcastle office of Baker Tilly Restructuring & Recovery, said: “Whilst government officials may breathe a collective sigh of relief today, they are not really in a position to rest on their laurels. All eyes should be on the financial impact for UK PLC, as government funding support falls away and debt takes control.

“The dramatic 57.9% fall in company administrations proves the backing Government has provided to UK PLC over the last year. However, with the Bank of England calling time yesterday on the quantitative easing programme, HMRC’s toughening stance on ‘time to pay’ agreements and previously lenient landlords becoming harder in their rent demands, administrations figures will rise again.”

Meanwhile, figures from the Insolvency service also revealed that the number of personal bankruptcies across the North East and Teesside have fallen slightly from 3,603 in 2008 to 3,510 in 2009. The fall of 2.6% compared to an increase nationally of 10.8%.

Nationally, the total number of personal insolvencies (Bankruptcy, Individual Voluntary Arrangement or Debt Relief Order) for the full year has exceeded 130,000.

Linda Farish – director of recovery & insolvency at RMT stated that whilst the outlook for 2010 is said, by some, to be brighter than the past few years she anticipates that the increased pressures on business brought on by the hardening of creditors positions will cause further hardship, particularly for smaller owner managed businesses for at least another 12 months.

She also said the only companies which should go into compulsory liquidation are those with a low asset base, or where it is in the public interest for a compulsory winding up.

She said: “Often directors don’t take advice quickly enough and a Company can be forced into compulsory liquidation by creditors when an alternative insolvency process may offer a better return for creditors.

“We always recommend that directors take early advice from an insolvency practitioner.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .