Company administrations up 50 percent from last year,
worryingly stringent times
ahead
(Please note that these
figures are available at:
http://www.insolvency.gov.uk/otherinformation/statistics/200811/index.htm)
The number of companies being placed into administration in the
third quarter of the year was 50 per cent higher than during the
same period last year according to statistics released today by The
Insolvency Service
The Insolvency Service today released figures which show a
total of 1007 companies were placed in administration in England
and Wales in the last quarter, compared with 668 in the same period
last year and 938 in the second quarter of this year.
Receivership appointments jumped a staggering 238 per cent
compared with the same period last year, leaping from 80 in Q3 2007
to 270 in Q3 2008. This increase in receiverships is a continuing
sign of the preference of some lenders to appoint receivers rather
than administrators and that receiverships are by no means a dying
process. However analysts should be aware that these figures
include LPA (Law of Property Act) receiverships which may have come
as a consequence of the recent steep decline in property
values.
Total company liquidations in England and Wales were also up
significantly in the third quarter of 2008, growing from 3622 in Q2
to 4001 in Q3, an increase of 10.5 per cent and an increase of
26.3% on the same period a year ago.
Malcolm Shierson, Recovery and Reorganisation Partner at Grant
Thornton said that unless the banking lending criteria loosened up
and liquidity was pumped back into the financial market, these
staggering statistics would continue to rise.
"The turmoil in the financial markets over the last few months
is now feeding through to the real economy, yet this is very much
the tip of the iceberg. Genuine fears are now growing as to the
depth and longevity of the impending recession. We predict
significant increases in these figures in the next quarter and
beyond."
"When looking at these results and going forward we should
consider the impact of the administration of Lehman Brothers
International Europe Ltd. This administration dwarfs all of the
others and may have a greater economic impact than all the other
administrations put together. I think we can be pretty certain that
we will see further fallout in the financial services sector
associated with the collapse of Lehman Brothers. Also it is too
early to tell if yesterday's massive interest rate cut will have
the desired impact of easing lending to businesses at an affordable
rate."
"It's not just the property and construction sectors that have
suffered a massive blow in the economic downturn, last month's
reported dramatic fall in UK GDP produced a greater decline
than was expected and the downturn has affected all sectors
including the manufacturing, retail and leisure sectors."
"With many businesses struggling to refinance and facing severe
cash flow problems it is imperative that directors impacted by the
credit crunch seek advice as soon as warning signs arise. Early
intervention is vital to allow for the remedial actions that will
stave off financial disaster. Proactive management of lenders and
other financial stakeholders is vital to companies as they go into
the uncertainty of 2009. Professional help is available for those
in this predicament," concludes Shierson.