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Insolvent companies on the increase despite strengthening economy

28 March 2014

According to research from Exaro, the number of distressed companies has risen since this time last year. Despite continued assurances of economy growth and confidence among the SME sectors, February saw a 5.2% increase in insolvency notices compared to February 2013. 

The Exaro Insolvency Index revealed 6,501 companies had filed one or more insolvency notices in the quarter up to February, compared to 6,355 in the same quarter last year.

Furthermore, the number of winding up petitions in that month increased from 463 (last year) to 577. More companies have also entered administration and liquidation than the same month last year.  

Surprisingly, after a long recession when the economy begins to strengthen again, many small businesses struggle to stay afloat. This is because many try and outdo competitors in the market but have little capital to meet the high goals set and often expand the business too quickly, giving way to cashflow problems. 

There is also the issue of the businesses facing a new year, after perhaps poorer than expected Christmas trading. 

Deputy Vice President of R3, Philip Sykes, commented, “Some businesses might be very dependent on good Christmas sales, so any failure to hit sales expectations in the run-up to December will cause problems in January and February.”