Company administrations shoot up 50 per cent from last year
10 Nov 08
The number of companies being placed into administration in the third quarter of the year was 50 per cent higher than during the same period last year according to statistics from the Insolvency Service. They show a total of 1007 companies were placed in administration in England and Wales in the last quarter, compared with 668 in the same period last year and 938 in the second quarter of this year
Receivership appointments jumped a staggering 238 per cent compared with the same period last year, leaping from 80 in Q3 2007 to 270 in Q3 2008. This increase in receiverships is a continuing sign of the preference of some lenders to appoint receivers rather than administrators and that receiverships are by no means a dying process. However analysts should be aware that these figures include LPA (Law of Property Act) receiverships which may have come as a consequence of the recent steep decline in property values.
Total company liquidations in England and Wales were also up significantly in the third quarter of 2008, growing from 3622 in Q2 to 4001 in Q3, an increase of 10.5 per cent and an increase of 26.3% on the same period a year ago.
Malcolm Shierson, Recovery and Reorganisation partner at Grant Thornton, said that unless the banking lending criteria loosened up and liquidity was pumped back into the financial market, these staggering statistics would continue to rise.
"The turmoil in the financial markets over the last few months is now feeding through to the real economy, yet this is very much the tip of the iceberg. Genuine fears are now growing as to the depth and longevity of the impending recession. We predict significant increases in these figures in the next quarter and beyond,” he said.
"When looking at these results and going forward we should consider the impact of the administration of Lehman Brothers International Europe Ltd. This administration dwarfs all of the others and may have a greater economic impact than all the other administrations put together. I think we can be pretty certain that we will see further fallout in the financial services sector associated with the collapse of Lehman Brothers. Also it is too early to tell if yesterday's massive interest rate cut will have the desired impact of easing lending to businesses at an affordable rate.
"It's not just the property and construction sectors that have suffered a massive blow in the economic downturn, last month's reported dramatic fall in UK GDP produced a greater decline than was expected and the downturn has affected all sectors including the manufacturing, retail and leisure sectors.
"With many businesses struggling to refinance and facing severe cash flow problems it is imperative that directors impacted by the credit crunch seek advice as soon as warning signs arise. Early intervention is vital to allow for the remedial actions that will stave off financial disaster. Proactive management of lenders and other financial stakeholders is vital to companies as they go into the uncertainty of 2009. Professional help is available for those in this predicament," concludes Shierson.
To view the insolvency figures, click here