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Liquidations are running at four times level before credit crunch

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Liquidations are running at four times level before credit crunch

Insolvency Index: figures reveal scale of devastating impact of recession on UK business

By Tim Wood, Henry Taylor and George Arnett | 14 June 2013

“S Dudley & Sons is yet another victim of the continuing difficulties in the construction sector” – Peter Dewey, joint administrator of S Dudley & Sons

Liquidations of UK companies are running four times higher than they were just before the credit crunch hit, analysis by Exaro reveals.

This month’s Exaro Insolvency Index compares current data with figures before the UK tumbled into the worst recession for decades, providing a stark illustration of the impact of the financial crisis on businesses.

The numbers in the graph above show that liquidators were appointed to 1,170 companies in the quarter from March to May in 2007. For the same period this year, the comparable figure is 5,013 – more than four times higher.

There is a similar pattern for resolutions or court orders to wind up companies, rising just under fourfold from 1,492 to 5,532.

The total number of administrations and receiverships rose less sharply over the same period, more than doubling from 240 to 629, and winding-up petitions increased by just under 80 per cent from 920 to 1,636.

However, the figures also suggest that there is something of an easing off of insolvencies across the UK.

This confirms the pattern shown in the Exaro Insolvency Index last month, which revealed that the number of UK companies going into administration or receivership is falling this year compared to 2012.

But some insolvency experts, such as David Kerr, chief executive of the Insolvency Practitioners Association, warn that the improving figures might be masking “zombie” companies, those able to service the interest on their debt but unable to repay capital.

On three of the four measures, insolvency figures fell back further in May compared with the previous month.

The Exaro Insolvency Index tracks all insolvencies throughout the UK, and across different business sectors, providing a detailed breakdown of UK company failures – a key economic indicator.

The first graph on the right shows just the figures for the single month of May before and after the credit crunch. The graph can be clicked to enlarge. It shows that insolvencies started to rise sharply in May 2007, some four months before Northern Rock sought emergency funds from the Bank of England.

The quarterly figures show that the construction industry has been hit particularly hard in the wake of the credit crunch. As displayed in the second graph on the right, appointments of liquidators have risen nearly fourfold, and resolutions or court orders to wind up companies are more than six times higher, comparing the quarter from March to May in 2007 with this year.

Again, the level of insolvencies in the construction industry has eased slightly over the past year.

The final graph shows the figures for the sector for the single month of May.

Exaro’s analysis is based on insolvency notices as they are published in the London, Belfast and Edinburgh Gazettes.

Insolvency notices must be submitted to these publications to cover the whole of the UK.

However, not every company is ascribed to a specific sector in the source data, although that is less true for 2013 than for 2007. But this change accounts for only a small proportion of the apparent uplift in the insolvency figures for the construction industry.

One victim was S Dudley & Sons, a Newport-based construction company, which was established in 1920 but went into administration in April. The company’s clients included supermarket giants such as Tesco, Sainsbury’s, Aldi and Waitrose.

The administrators, Peter Dewey and David Hill, partners at Begbies Traynor, the specialists in business recovery, said in a statement: “According to the directors, [S Dudley & Sons] had suffered a sustained period of difficult trading in which margins had been increasingly depressed by its clients in the retail sector.”

Dewey added: “S Dudley & Sons is yet another victim of the continuing difficulties in the construction sector.”

According to the London Gazette, a meeting of creditors was due to be held today.

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Sarah Davies
Sarah Davieshttps://www.exaronews.com/
Exaro News investigates matters of public interest and seeks to uncover the truth.

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