17 March 2011
London, 17 March 2011. The
rate of company failures has continued to slow during the first
quarter of 2011, down 1.4 per cent on Q4 2010 according to the
Graydon Insolvency Predictor, based on data from commercial credit
reference agency Graydon UK published today.
The number of corporate insolvencies is expected to fall by 12.7 per cent compared to the first quarter of 2010 according to Graydon's index, but will be up 8.2 per cent on the number of company failures recorded in Q1 of 2008 when the effects of the economic downturn had not yet been realized.
Martin Williams, Head of External Communications at Graydon UK commented: "The residual impact of the financial crisis is still being felt keenly, with the number of company failures still considerably higher than they were in 2008, prior to the onset of the downturn."
"We are now beginning to see green shoots, with both Bovis Homes and Persimmon reporting an increase in profits and sales activity in recent weeks to indicate a recovery in the construction sector, a traditional pointer of better prospects for the economy at large. The Government spending cuts have not yet begun to bite however."
Martin Williams says that in addition to public spending cuts, the impact of January's VAT increase and the speculation about the Bank of England raising interest rates will mean that non-essential retailers are likely to be most at risk as consumer confidence and spending power both decline.
According to the index, compulsory liquidations in 2011 Q1 will continue the downward trend seen in 2010, indicating that creditors are looking for alternative ways to recover their debts, for example through creditor voluntary arrangements or rescheduling repayments.
Martin Williams adds: "When it comes to the threat of insolvency action, struggling businesses appear to be benefitting in two distinctly different ways; on the one hand, they are being offered some respite from the threat of compulsory liquidation as creditors consider other options for recouping money owed to them, while HMRC's "Time to Pay" scheme continues to provide breathing space to company directors hoping to avoid entering into Creditors Voluntary Liquidation. The combination of these two factors is continuing to drive insolvency numbers down."