Company failures soared to their highest level for 16 years in 2009 after more than 19,000 firms succumbed to the recession - although they could have been worse claims a Birmingham expert.
James Martin, Midlands region Chair of insolvency trade body R3 and partner at the Birmingham office of Begbies Traynor, said the levels of insolvencies were below those expected in a recession but this was not necessarily a sign that the worst was over.
He said: “The last few months of 2009 were relatively quiet for insolvency practitioners as the Government’s ‘Time To Pay’ scheme kept some businesses away from insolvency and banks broadly continued to lend their support. This has a knock-on effect on personal insolvency as jobs are preserved and incomes remain steady.
“We know from previous recessions that, although the overall economic outlook is brighter, this can still be a dangerous time for businesses as creditors attempt to collect money owed and policy makers start to cut measures which were aimed at helping those in financial trouble. The MPC’s decision to hold interest rates at 0.5 per cent suggests they recognise the risk of a double-dip recession.
“Our members have identified an ‘insolvency lag’ which shows it can be years after recovery starts that insolvency figures level off. We expect some 28,000 corporate insolvencies this year in the UK, a 22.8 per cent jump on the figures for 2008 (22,792). We are also predicting some 154,000 personal insolvencies for 2010, a 22.2 per cent increase on 2008 (128,046).”
Insolvency Service statistics showed 19,077 firms went into liquidation across England and Wales - up 23% on 2008 and the worst result since 1993.
But the quarterly breakdown confirms an improving picture, with the number of firms in liquidation - where a firm is wound up and its assets sold off - falling by 4 per cent between the third and fourth quarter.
The figures show 4,372 firms went into liquidation in the final three months of 2009, which was down 3 per cent year-on-year.
And there was also a significant decline in the number of company administrations, which is often a more representative measure of corporate failures.
There were 849 companies in administration - in which an insolvent firm is placed into administration and managed with the hope of it continuing as a going concern - across England and Wales in the fourth quarter.
This was down 58 per cent year-on-year and the lowest number since the fourth quarter of 2007.
Administration figures confirm real estate firms, manufacturers and retailers were among the worst-hit sectors last year.
Data for Scotland and Northern Ireland revealed further recession pain across the UK, with Scotland seeing 584 companies in insolvency last year - the highest since 2004.
Northern Ireland saw the worst level for at least seven years, at 247 company insolvencies in 2009.
And there was no respite in the fourth quarter for Scotland or Northern Ireland, with the number of corporate failures rising 25% and 45% quarter-on-quarter respectively.
Last year was one of the busiest on record for insolvency practitioners and the level of fees being earned has caught the eye of the competition watchdog.
The Office of Fair Trading (OFT) announced an investigation in November into the structure of the market and anything which “could result in harm”, such as higher fees or lower recovery rates for certain creditors.
The OFT said its report followed fears raised by the Insolvency Service and the industry.