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Friday, 5 August 2011

Corporate Insolvency Figures For 2nd Quarter 2011

There were 4,233 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the second quarter of 2011 (on a seasonally adjusted basis). This was an increase of 2.7% on the previous quarter and an increase of 4.4% on the same period a year ago.
This was made up of 1,290 compulsory liquidations (which are up 19.8% on the previous quarter and up 11.1% on the corresponding quarter of the previous year), and 2,943 creditors’ voluntary liquidations (which are down 3.3% on the previous quarter but up 1.7% on the corresponding quarter of the previous year).

Additionally, there were 1,232 other corporate insolvencies in the second quarter of 2011 (not seasonally adjusted) comprising 350 receiverships, 695 administrations and 187 company voluntary arrangements. In total these represented a decrease of 6.0% on the same period a year ago.

These figures, again, don't really tell the whole story. 

Administrations are down as the popularity of the pre pack administration mechanism mechanism falls out of favour coupled with the fact that lenders are not  keen to crystallize their losses by calling in the administrators.  Also where an administration was previously possible currently more of these situations are turning into liquidations.

The sharp rise in compulsory liquidations is a reflection of how the HMRC is moving more quickly to issue a winding up petition against a company that owes it tax.  In fact, in May of this year, it appears that thousands of 7 day warning letters were sent out by HMRC as we received a higher level of calls than usual where this was a factor.  Obvious advice here is DO NOT ignore this letter as HMRC WILL issue a petition in 7 days.

So there are three factors at work here:  The economy, HMRC, and the banks.  Insolvency statistics are therefore not a good guide to the health of the economy. 

Of course, recent turmoil in the world markets today could cause further problems for companies going forward.

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