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Insolvency figures mask businesses' struggles

CFOWorld.co.uk staff | Feb. 6, 2012
Insolvencies in the UK increased by 7.2 percent in the fourth quarter on the previous year, official statistics showed on Friday, but experts claimed that this does not reveal the extent of the troubles facing businesses.

Insolvencies in the UK increased by 7.2 percent in the fourth quarter on the previous year, official statistics showed on Friday, but experts claimed that this does not reveal the extent of the troubles facing businesses.

The Insolvency Service's figures showed there were 4,620 insolvencies in the final three months of 2011, up 0.4 percent from the second quarter. In total, there were 16,871 insolvencies in 2011, the second highest total since 2002.

However, experts have warned that the surge in corporate insolvencies has not hit yet. Ian Gould, PKF's head of corporate recovery & insolvency, said that the number of liquidations is "modest in historical terms".

"Looking behind the numbers, we're seeing businesses stagnating or in slow terminal decline that are just about able to hang on thanks to low interest rates and forbearing bank managers reticent to pull the plug," he added. "There are real issues just below the surface that are not currently being addressed and which will eventually result in a significant jump in business failures."

Nick O'Reilly, insolvency partner at HW Fisher, said there were many businesses that were struggling along with little hope of survival. "The economic stagnation has spawned thousands of zombie companies, limping on and generating very little money. The true basket cases have long since gone bust, but there are many, many weak links which could still tip over the edge."

 

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