Following on from our earlier research on administrations more statistics are coming out that indicate that overall fewer businesses are going insolvent. England as a whole saw a 13% Q2 year-on-year decline in administrations at 533 companies, which is the lowest level since Q4 2007. Certain areas are performing better than others with the Midlands seeing a 30% decline in the overall numbers of business going into administration. Of course, administrations are not the whole picture with liquidations being the commonest insolvency procedure. Some research has been done by the FT that found that company dissolutions were at an all time high in percentage terms indicating that many businesses might be just shutting down perhaps with some small debts. There is no doubt that many companies are holding on and a low interest rate environment and a relatively benign approach by HMRC has helped then to continue to trade.
According to insolvency trade body R3, their research found the retail sector and the smallest companies are
suffering the most. Almost 1 in 10 retail businesses said that they are “very likely” to go into insolvency in the next 12 months.
The number of businesses worrying about their debt levels and insolvency fell to its lowest level for a year. R3 found 41pc of businesses said they hadn’t experienced any signs of its 13 key “distress indicators” over the last quarter, compared to 28pc in the previous quarter and 25pc last year. There are of course lots of distress indicators. Take a look at our list of warning signs of a distressed business. Meanwhile Begbies Traynor's Red Flag Alert has been highlighting certain sectors and areas that are suffering increased levels of distress but the overall picture is not showing a major shift one way or another.
With the recovery being "choppy" it is likely that statistics will be very hard to make sense of quarter to quarter. As such, we expect the year on year trend to be a more relevant indicator to the overall strength of the economy.