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Monday, 20 August 2012

Insolvencies in July fall by 9.5%

The latest insolvency index produced by Experian shows that since last July the overall insolvency rate fell by 9.5%  with 1,776 companies failing in July 2011 against 1,962 companies a year earlier.
Scotland's insolvency rate is now the lowest in two years after a 25.3% fall on the number of businesses failing since last July.
This has shown an improving picture for the month of July but as always it is not very scientific taking just one months figure.  However, it is yet more evidence that the country is not in quite as bad a state as the GDP figures seem to suggest.  
The study found the biggest improvements across the UK came from the non-food retail sector, which saw the rate of insolvencies fall the furthest - to 0.1% in July from 0.2% last year.  This is still a lot less than the 2.5% insolvency rate that was witnessed in the early 90s
Once cited reason are the number of rescues using the company voluntary arrangements (CVAs), where firms avoid going into administration by asking lenders and creditors - such as landlords - to renegotiate their debts.  This, in our view, is a preferable way to manage insolvency as opposed to pre pack administrations or simply liquidating a viable company.  
Travelodge is the latest firm to launch a CVA, announcing a deal last week to walk away from 49 loss-making hotels and write off £700 million of its debts.

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