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UK bankruptcies and company insolvencies down

There has been a drop in bankruptcy and company insolvency in the UK but an increase in company liquidation and individual insolvencies, according to the Government Insolvency Service in England and Wales.

Second quarter statistics indicate the number of companies falling into insolvency has fallen by 11.1% to 695. This is a 10.6% decrease on the same period as last year.

“Whilst today’s announcement could be read as positive news, corporate insolvencies historically lag economic performance and we are yet to see the full impact of Government austerity cuts and the weaker than forecast economic performance,” Grant Thornton recovery and reorganisation partner David Dunckley said.

In comparison, the number of companies entering liquidation increased by 2.7% to 4,233, which is a 4.4% increase on the second quarter of last year.

Dunckley said the number of administrations is a more accurate barometer of the health of the UK economy than liquidations.

“Most companies entering administration are liquated at a later date, creating both a lag and double counting effect that distorts the liquidation statistics,” he said.

There has been an increase in individual insolvencies from 30,145 in the first quarter to 30,513 in the second quarter. However, this is a 12.2% decrease from the same period last year.

Bankruptcy levels dropped from 12,539 in the first quarter to 11,113 in the second quarter, which is a 25.8% decrease from the same period last year.

Kingston Smith & Partners head of corporate recovery and business reconstruction Nick Miller said the fall in individual insolvencies should be seen in the context of the particularly high level they were at one year ago.

“The difficulties in credit markets are still preventing individuals from consolidating loans and remortgaging, and this will, over time, lead to a slight, steady rise in IVAs and bankruptcies,” he said.

Miller also said the compulsory liquidations are on the rise, “principally reflecting cases where HMRC is taking a more aggressive action where businesses fail to meet Time to Pay arrangements”.

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