Corporate liquidations rise in Q2 2011, compared to the same period last year
Corporate insolvencies have increased again, when compared to the first quarter of this year and the same period in 2010, according to the latest figures from the Insolvency Service (covering Q2 2011).
The seasonally adjusted, quarterly data reveals there were 4,233 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the second quarter of 2011.
This is a 2.7 per cent rise on the previous quarter and an increase of 4.4 per cent on the same period a year ago.
Compulsory liquidations, in particular, have increased by almost 20 per cent when compared to the Q2 2010 data.
This suggests that so-called ‘zombie companies’- firms with low profitability that can pay their interest bills but struggle to pay debtors- are being wound up, says Martin Walmsley, head of debtor insurance at Lloyds TSB Commercial Finance.
“As a result of the continuing tough trading conditions, we have seen many of these zombie companies run out of momentum, particularly as the retail and consumer markets remain challenging,” Martin added.
“However, businesses should not be downhearted by these statistics. Looking at the figures long-term, in the 12 months ending Q2 2011, only approximately one in 139 active companies went into liquidation.
“This liquidation rate remains low compared to a peak of 2.6 per cent of UK businesses filing for insolvency in 1993 and the average of 1.3 per cent seen over the last 25 years.
“To ensure firms are in a strong trading position and are protected against potential customer insolvencies and protracted payment, credit insurance, such as our debtor insurance policy should be implemented to safeguard cashflow.”