The number of businesses going bust in the West Midlands has dropped by nine per cent over the last six months, as the number of administrations nationwide fell to a near eight-year low.
In quarter three in the West Midlands, there have been 470 insolvencies compared to 519 in quarter two – a fall of nine per cent. The total number of failed West Midlands in 2012 so far is 1572, 9.3 per cent of the UK’s insolvencies.
The fall is actually smaller than the UK-wide figure, where there has been a 14 per cent reduction in the number of corporate insolvencies, and administrations are at their lowest level since the first quarter of 2005.
Nick Lee, director at RSM Tenon’s Birmingham office, said: “Corporate insolvency figures have made pretty miserable reading over the last few years and like most barometers of economic health there has been little to cheer about. However in the last few quarters, insolvencies have actually been decreasing.”
The fall in corporate insolvencies in the West Midlands is a fifth compared to the same quarter last year.
Meanwhile nationally there were 6,000 insolvencies in the first quarter of the year and that has dipped to just below 5,000.
Mr Lee said on the face of it, this sounds like great news but businesses are still facing ongoing problems which are masked by the current low interest rates.
“Many business owners are only just surviving, teetering on the edge, just covering the interest on their debts and their future is dependent on their creditors’ forbearance,” he added.
Meanwhile, PwC analysis shows that nationally, between July and September, 548 companies entered administration, which is a 18.5 per cent decrease on the same quarter last year and 12.3 per cent decrease on the second quarter 2012.
In the West Midlands, PwC’s recently published survey of corporate insolvencies reported a decrease of 20 per cent in the third quarter compared to the same quarter last year.
Matthew Hammond, regional chairman of R3 and partner at PwC in the Midlands, said: “There are fewer insolvencies this quarter as a result of low interest rates and supportive lenders and stakeholders and this is a welcome back-drop for our recovery out of recession. However, there is clearly still pressure and distress out there and there are still some casualties. The businesses making up these statistics are those who are running out of cash because of trading losses or those suffering a reputational or product issue problem.
“Liquidations have not fallen as much as other types of insolvency, which is indicative of the pressures on smaller businesses facing difficult trading environments and who do not have the access to rescue options that larger companies have. It will be interesting to see whether the new ‘Funding for Lending’ scheme has any impact on these figures.
“We expect these lower levels of insolvencies to continue into the new year, however, what happens after that depends crucially on the confidence of the consumer and the approach taken by the so-called ‘zombie’ companies to rectify their balance sheets.”
Across the UK, 4,846 companies entered insolvency in the third quarter of 2012. This is a decrease of 11.5 per cent on the same quarter of 2011 and a decrease of 8.7 per cent compared to the previous quarter of 2012.