Company prospects pick up as insolvencies fall in third quarter

Kasmira Jefford
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Insolvencies have been declining steadily since the recession (Source: Getty)

Prospects for business are looking brighter after industry statistics revealed a drop in the number of companies collapsing into administration in the third quarter of the year.

An estimated 363 companies entered administration in the last three months, a decrease of 2.4 per cent compared with the previous quarter and 5.5 per cent lower than the same quarter last year, data from the Office of National Statistics (ONS) revealed.

The number of company voluntary arrangements (CVAs), a process where businesses strike a deal their creditors over the payment of their debts, jumped by 32.1 per cent on the previous quarter to 111. However this was 14.6 per cent lower than last year.

A total of 612 companies were subject to a compulsory winding-up order, which was a 29.2 per cent decrease over the year and the lowest level since 1989. This helped drive a 10.2 per cent fall in total insolvencies over the year to 3,539.

Phillip Sykes, president of insolvency trade body R3, said: “The numbers of corporate insolvencies continue their long and slow decline since their peak in the recession. Although this week’s growth figures show businesses aren’t exactly flying, not too many are really struggling either.”

Meanwhile Ian Gould, a business restructuring partner at accountancy firm BDO, warned that the figures masked some deeper underlying issues such as intensifying problems in the industrial and manufacturing sectors.

“Companies have toughened up and become more efficient since the financial crash, leaving them in robust shape. However, they are facing a toxic mix of stronger global competition, high business rates, increasing energy and wage costs, and pensions burdens which are pushing more of them into financial difficulty. The collapse of the UK steel industry is only the latest example of this,” Gould said.

Personal insolvency levels fell by 18.5 per cent year-on-year despite a 2.8 per cent rise on the quarter.

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