Company administrations rise again as recessionary forces finally bite

May 22, 2011 - PRLog -- The number of troubled companies falling into insolvency in England and Wales rose for the second successive quarter, with administrations up 22% to 782 in Q1 2011 (Q4 2010: 642), according to statistics released today by the Government's Insolvency Service.

"The rise in corporate insolvencies results from a combination of factors that are dragging economic growth to a snail's pace. Rising global commodity prices are putting pressure on businesses at the same time that demand is falling," commented Malcolm Shierson, Partner at Grant Thornton's Recovery and Reorganisation practice.

"Of particular note is the volume of distressed retailers we are dealing with. This is unsurprising given the rise in input prices and increase in VAT which comes at the same time as the Government and households implement austerity measures to reduce their debts," Shierson pointed out.

"Whilst CVAs have recently been the insolvency process of choice in the retail sector, creditors are increasingly questioning whether a CVA will improve their ultimate return."

Meanwhile, the number of companies entering liquidation saw an increase of 3.7% to 4,121 in Q1 2011 (Q4 2010: 3,973). The latest figures reflect a 2% increase on the same quarter a year earlier (Q1 2010: 4,036).

"The number of administrations is a more accurate barometer of the health of the UK economy than liquidations. Typically large employers are first placed into administration when declared insolvent. Additionally, most companies entering administration are liquidated at a later date, creating both a lag
and double counting effect that distorts the liquidation statistics," concluded Shierson.

http://www.griffinandking.co.uk/

# # #

Griffin and King are a leading firm of Insolvency Practitioners within the West Midlands with offices covering Dorset, Hampshire, Shropshire and Mid Wales