Figures from the UK Insolvency Service just released on 4 February 2011 for the last quarter of 2010 (Q4) show a decline in compulsory and voluntary liquidations, continuing a downward trend.
The total number of compulsory liquidations and creditors’ voluntary liquidations for the quarter to 31 December 2010 was 3,955 in England and Wales, a decrease of 0.2% on the previous quarter and a decrease of 11.3% on the same period a year ago.
However, closer examination of these numbers reveals that there were 1,200 compulsory liquidations, up 5.8% on the previous quarter but down 9.9% on the corresponding quarter of 2009, while 2,755 creditors’ voluntary liquidations (CVLs), are down 2.6% on the previous quarter and down 11.8% on the corresponding quarter of the 2009.
Compulsory liquidations are therefore showing a very slight upward trend after the previous two quarters, when they were down 3.2% on the previous quarter and in Q2 were down 9.9%.
A more interesting and perhaps pertinent comparison is with the figures from the last recession.
Either directors are doing a fantastic job of restructuring their companies to remain profitable with positive cash flow, which is unlikely when the word is that advisers from the insolvency and restructuring professionals are not busy.
The other possibility is that “companies are just hanging on in there” with support from creditors, including HMRC and banks, adopting a very light touch on struggling companies.
Companies should bite the bullet and undergo restructuring to survive as viable businesses. Until then, they will continue to “hang on in there”.