Accountancy Magazine
Insolvencies hitting 55 companies daily
Companies should be ‘cautious’ as autumn nears
12 August 2009
Corporate insolvencies are affecting 55 companies a day, as figures show a rise by nearly 40% in the second quarter of 2009.
The second three months of the year have seen 5,055 corporate insolvencies across England and Wales, up 2.9% on the previous three months, and nearly 40% from the same time last year.
Large corporate entities are mainly being hit, causing an increase in the number of company administrations in the second quarter, up to 1,027 from 938 from the same time last year. But compared to the first three months of 2009, they have dropped by 21%.
Restructuring and insolvency partner at Freshfields Adam Gallagher, said: ‘A large number of businesses are still receiving triage. While some get sticking plasters, increasingly businesses with bad balance sheets and intrinsic trading challenges find solutions out of reach and administration or liquidation difficult to avoid.’
Gallagher said the reason administrations tailed off on the previous quarter could be the result of businesses receiving a cash boost through the Christmas and New Year sales.
He added that companies should remain cautious approaching autumn. ‘While the quarter on quarter figures do not represent great increases in corporate insolvencies, an ‘L’ shaped recovery continues to be the most likely. Therefore, the autumn could yet result in more misery for those companies which, as a result of continuing poor performance, are unable to arrest and remedy a breach in their lender covenants.’
The second three months of the year have seen 5,055 corporate insolvencies across England and Wales, up 2.9% on the previous three months, and nearly 40% from the same time last year.
Large corporate entities are mainly being hit, causing an increase in the number of company administrations in the second quarter, up to 1,027 from 938 from the same time last year. But compared to the first three months of 2009, they have dropped by 21%.
Restructuring and insolvency partner at Freshfields Adam Gallagher, said: ‘A large number of businesses are still receiving triage. While some get sticking plasters, increasingly businesses with bad balance sheets and intrinsic trading challenges find solutions out of reach and administration or liquidation difficult to avoid.’
Gallagher said the reason administrations tailed off on the previous quarter could be the result of businesses receiving a cash boost through the Christmas and New Year sales.
He added that companies should remain cautious approaching autumn. ‘While the quarter on quarter figures do not represent great increases in corporate insolvencies, an ‘L’ shaped recovery continues to be the most likely. Therefore, the autumn could yet result in more misery for those companies which, as a result of continuing poor performance, are unable to arrest and remedy a breach in their lender covenants.’
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