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Friday, 4 May 2012

Insolvency statistics being spun as usual

The latest insolvency statistics showing figures for the first Quarter (Q1) have been met with the usual wailing and spin by the press and those who stand to benefit from any increase in insolvencies.  Yes we work in the industry but we are going to report on the statistics how we see it.

Liquidations up by 4.3% on Q1 2011
up by 0.2% on Q4 2011

Administrations, receiverships, company voluntary arrangements are all down by 1% when compared to Q1 2011 but there has been an increase in administrations when looking at Q4 2011. As these statistics are not seasonally adjusted there is no point in comparing a quarter from a different time of year.  So the terms "spike" in insolvency rates is simply misleading.   

No wonder it is difficult to get out of recession when it is all gloom and doom backed up by dodgy interpretations of statistics. Yes liquidations are up but the majority of the increase was in compulsory liquidations which are most likely smaller companies with no assets and few employees.  Creditors voluntary liquidations only saw a marginal rise of 1.8%.

Perhaps the most telling statistic was the 35% increase is liquidations in Scotland and the 18% in Northern Ireland when compared to the same period last year.  Clearly there are problems there. 

In essence with an insolvency rate of less than 1% of registered companies the things are not looking too bad for the business sector.  The commentators are right though that there are lots of unprofitable, companies that are being kept afloat by the banks not wanting to crystallise losses, HMRC's continuing support and low interest rates.  They have been coined "Zombie" companies.  Who knows how long the undead will keep going....  but keeping people in jobs is good for the economy....

1 comment :

  1. I belive that there is a growing rate of insolvency in the private small hotel sector. The undead are out there with two major commercial estate agents making most sales through the administrator. There are some heart breaking and harrowing stories, since 2010 hotel values have dropped almost 30% so that once nice little nest egg contained within the asset value of a purchased hotel has in many cases been wiped out and agents are predicting 7 times reconstructed earning figure for the price of hotels, forget the fact that it might be in two acres and a Gothic Victorian pile, if your income is 100,000 then is worth 700,000, end of story. The main impact will be on private small hotels with less than 30 rooms purchased after 2007 they are probably drowning below the LTV threshold which means they have no place to go except build the business. Put this together with a challenging market because of cautious consumers and as my mum says 'your hand is in a dogs mouth' I believe that HMRC will be a major creditor as most hotels have to pay the 'ransom creditors' to stay in business and that only leaves the tax man or the banks to push back. The problem is more acute for private hotels as owners often live on the premises so 'throwing in the towel' is not an option as this can literally mean losing both your business and your home.


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