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More businesses fold in first quarter

02/05/2008

Company insolvencies have risen four per cent from last year for the first quarter of 2008 as the downturn hits business, according the latest official figures.

The Insolvency Service said there were 3,210 liquidations in England and Wales in the first quarter of 2008, an increase of two per cent on the previous quarter and an increase of four per cent on the same period a year ago.

Mike Jervis, partner in the business recovery services practice at PricewaterhouseCoopers, urged businesses not to panic "but to ensure they are doing all they can to manage their way through the potential downturn as soon as they see signs of financial distress".

Mr Jervis added: "History has shown that the companies who emerge from the downturn as sector leaders will be those who proactively undertake a strategic, financial and operational review now."

Most of the liquidations were voluntary, making up 2,125 of the total, an increase of 25.4 per cent on the previous year. There were 1,085 compulsory liquidations, a decrease of 22 per cent on the quarter last year.

Personal insolvencies were down 13.2 per cent in the quarter compared to a year ago. The decrease was mostly down to a sharp drop in the number of Individual Voluntary Arrangements (IVAs) in the quarter, which were down 22 per cent compared to last year.

Quarter-on-quarter, the number of individual insolvencies rose by 1.7 per cent. Altogether, there were 25,264 personal insolvencies over the three months, made up of 15,651 bankruptcies and 9,614 IVAs.

Global Insight economist Howard Archer said: "Significantly, the decline in individual insolvencies from their peak fourth-quarter 2006 level has been primarily due to a reduction in the number of people entering into IVAs.

"This was largely a consequence of lenders becoming markedly more reluctant to enter into IVAs and setting stricter terms. In the first quarter of 2008, personal bankruptcies edged up by 0.1 per cent from the fourth quarter of 2007 to 15,651, while IVAs were up 4.3 per cent to 9,614."

Mr Archer warned although the figures look modest in the first quarter, they are likely to deteriorate further over the next few months as credit conditions remain tight.