The latest Insolvency Statistics were published on Friday 12 August 2011 and tell their own story.
In summary compulsory liquidations are up, voluntary liquidations are down, administrations are down and CVAs remain static.
- Compulsory Liquidations up on last quarter and on the same quarter last year: 1,325 in Q2 2011 | 1,185 in Q2 2010
- Voluntary Liquidations down on last quarter but similar to the same quarter last year: 2,951 in Q2 2011 | 2,909 in Q2 2010
- Administrations down on last quarter and down on the same quarter last year: 695 in Q2 2011 | 777 in Q2 2010.
- Company Voluntary Arrangements similar to last quarter but down on the same quarter last year: 187 in Q2 2011 | 232 in Q2 2010.
Set against a background of slowing growth over the last three quarters at 0.5% from January to March, 0.2% for the second quarter and contraction of the UK economy by 0.5% in the fourth quarter contraction of 2010 there is a conclusion that businesses are putting off restructuring and will do so for as long as possible, at least while the economy is uncertain.
Historically insolvencies have increased during the upturn after the bottom of a recession, when business prospects can be predicted. Right now it is not clear if we have reached the bottom and if there will be any growth, let alone how much, or if the market will flatline for some time.
As an example, compare liquidation figures for the mild recession of 2001-2002 with the recent recession, already referred to as the worst since the Great Depression of the 1930s. The total number of liquidations for each year was: 2001:14,972 | 2002:16,306 | 2003:14,184 | 2004:12,192 | 2007:12,507 | 2008:15,535 | 2009:19,077 | 2010:16,045.
These and the figures for 2011 would imply that we are coming out of a very mild recession, which is plainly not the case.
The increase in compulsory liquidations does indicate a level of frustration over directors of companies not taking action to deal with their difficulties. Creditors are becoming impatient with directors who are putting off restructuring and starting to force their hand by issuing winding up petitions.
The tragedy is that without restructuring, a great many businesses lack optimism through being unable to plan for the future. They have run down their stock levels, cut staff to the bone, engage in limited marketing, are not investing in capacity and are certainly not looking for growth opportunities let alone looking abroad and laying foundations for their future.