Business rescue professionals are concerned the UK economy still continues to present risks to the financial health of a large number of UK firms. Figures released for the final quarter of 2010 demonstrate that more firms went into administration than during the previous quarter. There are also signs that austerity measures could further pressurise British business. Record numbers of personal insolvencies in recent years have also been accompanied by a rise in company insolvency.
Although the last quarter saw a slight drop in company insolvency, 4988 British firms still entered into liquidation. There were 1,200 compulsory liquidations, accompanied by a further 2,755 voluntary liquidations; overall this represented a marginal decrease of 0.2% compared to the previous quarter. Nonetheless, Compulsory liquidations increased by 5.8% against the previous quarter and there were an additional 1,114 corporate insolvencies, where 642 companies entered administration. Again, this figure was marginally higher than during the previous quarter. Additionally, a further 302 companies entered receivership, and 170 were able to negotiate time to continue trading via a company voluntary arrangement.
The statistics indicate even larger firms are facing insolvency and liquidation despite various official initiatives aiming to mitigate against the effects of the recession. The HMRC 'Time to Pay' scheme was designed to ease cash flow pressures for UK firms. From last year, there were more restrictive conditions imposed upon the scheme and many firms could face new tax demands they cannot meet.
Analysts have also speculated that as parts of the economy begin to improve, this could ironically create more pressure for the very businesses that managed to survive it. As the economy strengthens, creditors may become reluctant to wait for repayments, leaving companies at risk if their cash flow has remained sluggish.
There are also concerns that for many firms, the final factor could be a deficit in their volume of trade transactions during the coming year. Record numbers of personal insolvencies combined with changes to taxation affect those companies reliant on higher value spending by individuals. Furthermore, analysts point to the obvious impact Government austerity measures could have on those reliant on public contracts.
UK firms are currently supported by the Government's Business Link service providing free advice including interactive online services, training events and a telephone helpline. Professional business insolvency and rescue services are represented by the trade body, R3, who offer training courses plus access to business recovery practitioners.