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New insolvency figures - a cause for optimism?


It is said that there are lies, damned lies and statistics. 

The latest figures for corporate insolvencies released by the Insolvency Service for England and Wales appear to be a case in point. 

The bare facts are that during the second quarter of 2010 there were just over 4,000 liquidations and a further 1,300 other forms of corporate insolvency (including receiverships and administrations).  These figures are down approximately 19% from the same period in 2009.  This would suggest that the worst of the recession is over and the economy is moving into a period of strong recovery.  Of course everybody knows that this is far from the case. 

It seems to me that the figures for corporate insolvency do not reveal a couple of ticking “time bombs”.  The first of these is the strong possibility that as soon as interest rates increase, that will be the final straw for a number of companies and the figure for liquidations and administrations etc will rise again.

The other, perhaps more significant and more worrying issue, is the very large numbers of companies which are still being kept going courtesy of HMRC “Time to Pay” agreements (for more on those, see my January blog).  The fact is that without the leniency of HMRC a much higher number of companies would have unfortunately failed during the first half of this year.  There is no guarantee that when HMRC finally do stop supporting those companies, they will have become strong enough to survive independently. 

The figures for personal insolvency perhaps paint a more realistic picture.  The number of bankruptcies and IVAs has increased 5% in the second quarter of this year when compared to the same period in 2009.  Some 34,000 individuals were either made bankrupt or became subject to IVAs during the last quarter, demonstrating how a large numbers of individuals are still struggling with significant personal debt.  Again, any real rise in interest rates may well push many more individuals into insolvency.  That is even before the government’s current austerity measures begin to really bite.

Regardless of whether there is a “double dip” recession, and whatever happens to house prices, unfortunately I can only foresee an increase in the numbers of both personal and particularly corporate insolvencies over the next two quarters and into 2011.  This will be so especially if HMRC begins to demand higher or indeed full repayment of businesses liabilities.

The latest statistics therefore simply do not reflect the reality of the situation for many businesses struggling to avoid insolvency.  As ever taking early advice from an Insolvency Lawyer or Practitioner is strongly advisable.

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