The latest insolvency statistics showing figures for the first Quarter (Q1) have been met with the usual wailing and spin by the press and those who stand to benefit from any increase in insolvencies. Yes we work in the industry but we are going to report on the statistics how we see it.
Liquidations up by 4.3% on Q1 2011
up by 0.2% on Q4 2011
Administrations, receiverships, company voluntary arrangements are all down by 1% when compared to Q1 2011 but there has been an increase in administrations when looking at Q4 2011. As these statistics are not seasonally adjusted there is no point in comparing a quarter from a different time of year. So the terms "spike" in insolvency rates is simply misleading.
No wonder it is difficult to get out of recession when it is all gloom and doom backed up by dodgy interpretations of statistics. Yes liquidations are up but the majority of the increase was in compulsory liquidations which are most likely smaller companies with no assets and few employees. Creditors voluntary liquidations only saw a marginal rise of 1.8%.
Perhaps the most telling statistic was the 35% increase is liquidations in Scotland and the 18% in Northern Ireland when compared to the same period last year. Clearly there are problems there.
In essence with an insolvency rate of less than 1% of registered companies the things are not looking too bad for the business sector. The commentators are right though that there are lots of unprofitable, companies that are being kept afloat by the banks not wanting to crystallise losses, HMRC's continuing support and low interest rates. They have been coined "Zombie" companies. Who knows how long the undead will keep going.... but keeping people in jobs is good for the economy....