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Company insolvencies continue to fall

1 July 2014

According to the latest Exaro Insolvency Index figures, there were 2,477 companies in administration or receivership in May compared to 2,542 the same time last year (a fall of 2.6%).

Administrations have continued to fall since April, which saw company failures decline by 2.8% compared to the same month in 2013. These latest figures suggest a 'post-recession phase', according to Giles Frampton, president of business recovery association, R3.

Due to low interest rates and perhaps more informal deals with creditors, the number of administrations hasn't increased for a few months. This indicates a new stage of the recovering economy, like Frampton suggests.

There should be a warning however to those companies replying on low interest rates to continue trading. With interest rates to rise in the near future, more businesses will start to struggle and it's expected the number of insolvencies will rise alongside increasing interest rates.

The Index report shows the number of liquidations and winding up petitions have actually increased by more than 100 cases each in May since the same time last year. This suggests HMRC and creditors are putting down tougher charges against those businesses in severe financial distress.

If you're concerned about the future of your business if interest rates change, it's worth considering a CVA or a pre-pack administration. Alternatively, you may be able to arrange an informal deal with creditors to ensure debt can be paid off while the business continues to trade. Call us on 0800 9700539 for help with arranging this or if you need further advice on all the options available.

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