Businesses in the UK are facing tough trading conditions and are more likely to become insolvent than last year, official figures show.
The latest figures from the Insolvency Service show a 25% rise in the number of companies entering administration from the same period last year.
Just below 5000 firms went bust between April and June this year and analysts are predicting that there’s worse to come.
“We think the numbers will continue to show a double digit increase in what is an economically challenging environment,” warned Mike Jervis, a partner at PricewaterhouseCoopers.
However, Jarvis added that many struggling firms could still be saved and that insolvency wasn’t necessarily the end for a company anymore.
“Insolvency is not viewed as a death sentence anymore and businesses are seeing that insolvency techniques can be used as a mechanism to salvage and revitalise ailing operations,” he said.
“Used in the right circumstances, insolvency procedures including pre-packaged administrations can help to rescue a business, saving jobs, and preserving value for stakeholders and continuity for suppliers."
Alan Tomlinson, partner at licensed insolvency practitioners Tomlinson’s, agreed that attitudes insolvency have altered.
“The upward trend in company liquidations was widely anticipated given the general economic slowdown affecting the owner managed business sector.
“Increases in administrations are partly due to the same reason but also reflect government policy of administrations being the preferred method of dealing with insolvency and the fostering of the rescue culture.”
He also added that there were many relatively well-established companies which had been hit by the economic slowdown.
“The rise in receiverships is interesting and indicates that an increasing number of well-established businesses that are over five years old are suffering in the current climate.”
© Crimson Business Ltd. 2008