With the number of corporate insolvencies in the West Midlands decreasing, businesses should not be hoodwinked into thinking that the economic outlook is improving, says PwC. Instead, some businesses which are struggling to turn a profit could consider restructuring for success.

Earlier this month, PwC statistics revealed that 382 companies in the West Midlands became insolvent in the third quarter of 2011, compared to 446 in the previous quarter - a 14% decrease. This regional decrease was slightly greater than the 11% decrease seen UK-wide.

With no immediate let up in the economic conditions in sight, business recovery specialists at PwC are warning that cash-strapped retailers, construction companies and businesses exposed to the public sector spending cuts must be prepared to make further changes to their businesses in order to successfully navigate the financial challenges that a further period of low growth and low confidence will create.

Matthew Hammond, partner at PwC in the Midlands, said:

"The economic downturn since 2007 has been unusual in that we have seen fewer insolvencies than might have been expected. At the height of the recession in the early 1990s, we saw about 7,000 insolvencies a quarter in the UK but this time round the rate of insolvencies has consistently been around 4,500 per quarter.

"Despite finding the economic conditions very challenging, a significant number of regional businesses have managed to convince lenders that they are capable of riding out the downturn as they wait for things to pick up.

"The fact that so many businesses have managed to survive - sometimes with the support of lenders who have largely avoided calling in their debts - could be concealing the true level of difficulties in the economy. Continued pressure in the public sector, a difficult property market and challenges facing the retail sector suggest that the current level of quarterly business failures will continue well into 2012. There is also a risk that we could see a spike in the level of business failures at critical dates, such as the December and March rent quarters. We should also bear in mind that based on the experience of past recessions, there is likely to be an increase in business failures when a solid pattern of growth returns.

"There are a significant number of businesses in the region that have been settling for a disappointing trading performance because they believe there is no alternative. There are, however, some great examples of Midlands companies that have managed to turnaround their financial performance and are continuing to adapt to the challenging environment.

"The businesses that will survive and be well-positioned for the recovery when it comes are those looking for ways to achieve growth by gaining market share, at the same time as staying focused on cost control."