The second quarter saw a sharp drop in the number of companies shutting their doors indefinitely. This is great news as the UK still fights to remove any chances of going through a double dip recession. Experts warn to not get too comfortable though, as public sector jobs cuts will soon be taking place.
Overall, insolvencies have been falling for the last year, even though there was a small rise in the first quarter, but only 0.5 per cent. While business insolvencies continue at a slower rate, personal insolvencies seem to have peaked and posted their first quarterly decrease since the end of 2007.
Insolvency specialists warn many companies are still at risk, especially those who are supported by public sector spending. Businesses in the dominant services sector are already feeling the pain of cancelled government contracts. This being a result of the Government’s new cut backs plan.
“This is a welcome trend in the number of business failures, but the UK economy is not out of the woods yet,” said Malcolm Shierson, a partner at Grant Thornton’s recovery and reorganisation practice. The recent lackluster performance of the important services sector is a real cause of concern, coming before the full impact of the reductions in government spending and the impending VAT rise.”
The fact that banks are still tightly controlling the lending ability to small and medium sized companies does not benefit any business within the community. As most businesses today are small or medium sized, it is a concern which needs to be dealt with.
“It is still difficult to see how we are going to get out of the rut we are in, as many companies still cannot get the fincancing they need to survive,” said Brian Johnson, an insolvency practitioner at chartered accountants HW Fisher and Company.
A slight reform in lending from banks of medium size and smaller, could keep the insolvency numbers moving in the right direction.