Company insolvency rates fall to record low
Levels of company insolvencies are at a record low in England and Wales, according to Insolvency Service figures for the second quarter.
It means the total is currently at a 17 year low, although instances of companies entering liquidation did increase in the same period.
The Insolvency Service puts this down to the fact 1,131 connected personal service companies were forced into liquidation on the same day as a result of alterations to rules relating to claimable expenses.
However, when the figures for personal service companies are removed from the equation, the number of liquidations dropped by 16% when compared to the first quarter.
Some 3,416 companies entered liquidation in the second quarter, compared to 4,038 in the first three months of this year. The overall figure meanwhile is down 3.5% year on year.
It is suggested that slowing economic conditions are yet to have a wide-ranging impact on businesses, and that a rise in insolvency could be expected later in the year.
Another factor to consider is that the official figures only take into account any businesses that face liquidation and insolvency, and not those that are on the verge of it.
Rising inflation has hit profit margins while consumer confidence has shown signs of slowing as the pound has weakened leaving many businesses facing an uncertain future.
Should the Bank of England opt to increase interest rates, then an even greater number of firms could be forced to consider their futures and the options available to them.
An insolvent liquidation is often the final appropriate option for a business if all other avenues are exhausted – a firm should seek advice if it unsure of its alternatives.
Any approaches should attempt to find the best outcomes for all concerned – from owners and creditors to stakeholders and employees.
By Phil Smith