Fewer closures in 2010 but many firms are still walking an economic tightrope

FAR fewer struggling UK companies fell into administration in 2010 compared with 2009, Deloitte research showed yesterday.

Insolvencies fell by 35 per cent, or by 1,102 companies last year, to 2,086 in 2010 from 3,188 in 2009, analysis of notices in the London Gazette over the year showed.

Policymakers have worked to keep the business environment as benign as possible for companies – but experts fear this may be keeping firms artificially solvent.

“The reality is that many companies are still walking a tightrope,” said Deloitte’s reorganisation services partner Lee Manning.

“A large number of struggling companies were able to stay afloat because of low interest rates, a lenient approach by lenders and HMRC’s favourable Time to Pay scheme. However, the rapidly changing economic environment will no longer make this sustainable.”

Property and construction companies were the hardest hit, accounting for one in five insolvencies. The sector saw 453 companies fall into administration, though this was better than in 2009 when 683 firms went down.

Retailers fared better, as insolvencies fell 43 per cent to 165 in 2010 compared with 290 the previous year. But Manning said retailers may “struggle to cope in the first few months of 2011” in the wake of government spending cuts and the VAT increase.