A local insolvency expert has warned that while figures released today (February 7) show the number of corporate insolvencies has dropped, they are likely to rise as the economy recovers throughout 2014.
Official quarterly insolvency statistics released today show corporate insolvencies in England and Wales fell from Q3 to Q4 2013.
James Stares, Chairman of the Southern Committee of R3, the trade body for insolvency professionals, said: “The corporate insolvency figures are in keeping with the general downward trend in new cases since the recession. Insolvencies are now a third down from their peak at the end of 2008.
“Given the recent pick-up in the economic recovery though, it is not clear how long this trend will last.
“The early stages of an economic recovery are often a lot harder for some businesses to negotiate than recessions themselves. Historically, corporate insolvencies increase as the economy exits recession. With corporate insolvencies still low, it may be the case that economic recovery hasn’t taken hold as firmly as it might otherwise appear.”
James, also advisory director at Grant Thornton in Southampton, added: “Stuttering growth, low interest rates, and creditor forbearance have helped keep corporate insolvencies lower than they normally would have been since the recession. Some businesses will have taken advantage of the extended gap between recession and growth to put their finances back in order, but this won’t be the case for everyone.”
“The economic recovery and any future rise in interest rates is likely to put upward pressure on insolvencies.”
“Indeed, recent R3 research found that 96,000 businesses would be unable to repay their debts if interest rates were to rise, while 166,000 businesses said they were having to negotiate payment terms with their creditors.”
