Insolvency rates rise as small businesses struggle

Date: 4th August 2008

Official government figures have revealed that more businesses went into insolvency in the second quarter of the year, as the impact of the credit crunch began to be felt.

Data from the Insolvency Services showed that there were 3,560 compulsory liquidations and creditor's voluntary liquidations (CVLs) in total in England and Wales during the second quarter of 2008 - up 11.6 per cent on the previous three-month period.

In particular, there was an increase of 19.8 per cent in the number of compulsory liquidations.

Commenting on the figures, accountants at PricewaterhouseCoopers said that they had predicted in January that the number of insolvencies would rise at a rate of around ten per cent this year.

One accountant at the firm, Mike Jervis, explained: "We do think the numbers will continue to rise at least at this rate throughout the year.

"Firstly because there are an increasing number of companies in work-out and, secondly, because many management teams have not been through a downturn before."

"We recommend that they re-think their scenario planning, if necessary on a worst case basis, to manage through the downturn."