The first quarter of 2011 saw a rise of nearly four per cent in
the number of businesses going bust in England and Wales, according
to the Government's Insolvency Service.
The increases marks the start of a tricky time for many Black
Country firms, says Black Country insolvency and corporate recovery
practitioner John Travers, as more and more find themselves
squeezed by increased costs, deteriorating trading conditions,
lack of access to funding and, increasingly, impatient
creditors.
The number of business going into liquidation in the first
quarter of 2011 went up to 4,121 on a seasonally-adjusted basis.
This figure is up 3.7 per cent on the previous quarter and
represents an increase of 2.1 per cent on the same period a year
ago.
There were 1,074 compulsory liquidations, a reduction of 10.2
per cent on the previous quarter and 17.2 per cent on the
corresponding quarter of the previous year.
However, there were 3,047 creditors' voluntary liquidations,
marking an increase of 9.7 per cent on the previous quarter and
11.2 per cent on the corresponding quarter of the previous
year.
Mr Travers, of Stourbridge-based practice John D Travers &
Co, comments: "It appears that the long period of creditor
tolerance may be coming to an end which could mark the death knell
for those firms already struggling to pay their way.
"This combined with a tougher stance from HMRC and the banks'
insistence on increased security on lending will leave many with no
option but to review their finances and restructure operations
before they run into a fatal abyss," he warns.
The number of company administrations was up for the second
consecutive quarter to 782, a 22 per cent rise on last quarter's
statistics.
There were also 349 receiverships and the number of Company
Voluntary Arrangements (CVAs), in which the company repays a
percentage of debt over a period of time, rose to 183 compared to
170 in the last quarter of 2010.
John says: "Mid-sized firms appear to be most at risk of
failure, as they are less able to adapt quickly than those with
only a handful of staff and are more vulnerable to the lenders than
the largest corporates.
"Owners and managers of such businesses are advised to enhance
their risk management practices to ensure that the early warning
signs of financial distress are not overlooked."
The statistics also revealed that the number of individuals
declared insolvent fell to its lowest level for more than two years
during the first quarter of 2011.