11/08/2010
The number of businesses failures in England and Wales has dropped by a fifth, according to data published by the Insolvency Service.
As reported by Reuters, the good news reveals that in the second quarter of 2010, a fifth fewer companies were forced into liquidation when compared to the same period in 2009.
The news, combined with earlier reports that the economy grew twice as fast as expected in the second quarter of 2010, suggests that companies could have seen the worst of the recession.
The same could be said for households, as the number of personal insolvencies shrank when compared with figures for the start of the year.
"The UK economy is not out of the woods yet," warned Malcolm Shierson, partner at Grant Thornton.
However, Will Wright, director of restructuring at KPGM told Sky News that a failure to get hold of cash could cause more businesses to fold in the future. He said: "It's only a matter of time before interest rates have to rise and then I think we're going to see a very significant increase in corporate insolvencies - you tend to see corporate insolvencies rise as we come out of recession as companies have problems getting hold of cash."
Instead of collapsing into administration, cash-starved businesses should look at invoice finance as a way of boosting their cash flow. By freeing up cash tied up in invoices, businesses can see their cashflow return to healthy levels, which would help fight off any risk of insolvency.
Laura Nineham