Slowdown in numbers of insolvent businesses

Nov 7 2008 by Peter McCusker, The Journal

NEW figures show there has been a slowdown in the number of North East companies entering insolvency in the last quarter – although it is still 41% higher than the same period last year.

In total, 127 businesses in the North East and Cumbria entered insolvency in July, August and September of this year compared to 136 in the previous quarter – a fall of 6%.

Nationally the total number of insolvencies rose by 20% in the last quarter and are 40% up on the same quarter last year.

Sean Hamilton, director in the business recovery services practice at PricewaterhouseCoopers in Newcastle, which compiled the research, said: “While the North East and Cumbria has bucked the trend showing a small decline in insolvencies this quarter, a 41% increase on the same period last year shows the lack of confidence and capital is now impacting a much broader range of the economy than we have experienced to date.

“Despite grabbing the headlines on an almost daily basis over the last quarter, insolvency is not necessarily viewed as a death sentence anymore and businesses are seeing that insolvency techniques can be used as a mechanism to salvage and revitalise ailing operations.

“Used in the right circumstances, insolvency procedures including pre-packaged administrations can help to rescue a company, saving jobs, and preserving value for the company and continuity for suppliers.”

The sectors suffering the highest numbers of insolvencies in the North East and Cumbria in the quarter are construction, manufacturing and retail.

London has the highest number of insolvencies in Q3 quarter with 1,073, a 54% increase.

Liz Mayes, assistant regional director for the CBI North East said: “There’s no doubt that businesses continue to face tough economic times but we would expect to begin to see some of the government’s measures to encourage banks to start lending, coupled with the 1.5% cut in interest rates, to start to feed through to businesses over the coming months and have an impact on these figures.”