New research reveals a small fall in corporate insolvencies in the West Midlands last quarter, as the construction sector continues to be the hardest-hit.
A total of 425 companies were recorded in the region in the first three months of the year, compared to 429 in the fourth quarter of 2010.
Experts say figures reflect challenging conditions facing many regional companies as the fragile economic situation continues.
The fall in corporate insolvencies recorded in the West Midlands was among the lowest seen across the UK, according to the latest PwC analysis of insolvency statistics.
Nationally, 3,657 companies became insolvent in the first quarter of 2011 compared to 3,829 in the last quarter of 2010 – a 4.5 per cent decrease.
The level of insolvencies fell by 14 per cent compared to the first quarter of 2010.
Matthew Hammond, partner and business recovery specialist at PwC in the Midlands, said: “The improving picture in the UK of declining levels of corporate failure should not lead to complacency and as we can see by the firm’s latest analysis, corporate insolvencies in the West Midlands have fallen only very slightly.
“The UK economy is by no means out of the woods yet and the impact of the Government’s public sector spending cuts, which have yet to be felt, are likely to have a further adverse effect on consumer spending and especially on those companies supplying the public sector.
“The trend of falling corporate insolvency levels during the recent recession has been unusual but this is partly due to a combination of factors which have provided breathing space for many struggling businesses.
"Persistently low interest rates, increased time to pay agreements by HMRC, and a generally supportive attitude from secured lenders seeking to avoid reporting losses on their balance sheet, have all helped. ”
Nationally, the worst affected sectors continue to include construction (614 companies), manufacturing (452), retail (448), hospitality & leisure (239) and real estate (139). However, each of these sectors showed a marked improvement when compared to the same quarter in 2010.
It is notable that the level of insolvencies within these sectors (apart from real estate) increased from the levels experienced in the last quarter of 2010. This trend may be expected to continue within these particular sectors when the cumulative effects of the spending cuts begin to impact the UK economy.