Administrations rose 1.4% to 642 in Q4 2010 (Q3 2010: 633). The latest figures reflect a 24.4% decrease on the same quarter a year earlier (Q4 2009: 849).
"This rise reflects the increasing pressure that many UK firms are facing. However, these figures are still way off their peak in Q1 2009, when 1,311 companies fell into administration," commented Malcolm Shierson, Partner at Grant Thornton's Recovery and Reorganisation practice.
Meanwhile, the number of companies entering liquidation saw a slight fall of 0.2% to 3,955 (Q3 2010: 3,964). The latest figures reflect a 11.3% decrease on the same quarter a year earlier (Q4 2009: 4,457).
"Whilst these figures could be said to indicate rising fortunes for the UK economy, dark clouds are looming on the horizon," continues Shierson.
"Increases in both direct and indirect taxes are starting to bite. The Government's austerity measures will increasingly impact on the private sector economy as the cuts accelerate. We are working with an increased number of distressed retailers, particularly those reliant on consumers making large discretionary purchases."
"Moreover, it is the growing probability of sustained rises in interest rates that poses the biggest threat to companies with obligations to service large debts."
R3 president, Steven Law, comments on the latest insolvency statistics:
Corporate insolvency statatistics
“The fact that corporate insolvencies in 2010 were lower than in 2009 suggests that this has been an atypical recession. HMRC’s Time to Pay scheme and the historically low interest rates have been effective at stemming the flow of insolvencies that usually occur post-recession. However it is important that businesses continue to carefully monitor their financial health as many will be affected by the implementation of recent fiscal policies.
“Businesses that rely on consumer spend will see their bottom line affected by the VAT increase as they try to absorb the tax or pass it on to their consumers which will have a negative effect on consumer-demand.
“Our research found that ten per cent of businesses describe themselves as reliant on public sector contracts and these businesses will be hit as the public sector cuts start to take effect this year. Our members believe that the construction industry will be the worst affected by the public sector cuts due to the reduction in capital spending in education and social housing.
Late payments by companies – an early indicator of weakening trading – have increased to the highest level in three years, Experian has warned.
Payments in the final quarter of 2010 bucked the slowly improving trend for the year by rocketing 16pc to an average of 25.7 days late, the information services company said.
Payments are "timely" indicators of company health and banks will scrutinise the data to inform lending decisions. They may respond by tightening credit conditions for small companies further.
