Administrations dropped by 24% in the final quarter of 2010 compared to Q4 the year before, according to research conducted by Baker Tilly.
London and the South East of England saw a drop in corporate insolvencies of 37%, whilst in the rest of England, the drop averaged out at 14%. However, the South West of England did not fare so well. In the fourth quarter of 2009, the region recorded 29 insolvencies, but in the corresponding period last year, the figure had increase by 31%, to 38.
RSM Tenon believes that we will see corporate insolvencies increasing this year. Carl Jackson who heads the recovery team at RSM Tenon said that the 2010 figures did not give a true picture of UK businesses because the insolvency level in 2009 was abnormally high.
He also said that this year would be difficult for businesses and the UK is now facing the serious risk of a double dip recession. Several businesses are already on a knife edge and if the Bank of England’s MPC bows to pressure and increases interest rates more businesses will fold.
Sectors such as retail and hospitality, which depend on discretionary spend, will continue to struggle due to increasing inflation and the VAT rise, he added.
The problem could be further compounded by HMRC’s tougher stance on the deferment of taxes. Last year the Revenue turned down 5.8% of Time to Pay arrangements, compared to 2.7% in 2009. The Time to Pay scheme was a lifeline for many companies who struggled during the global downturn but with the banks still not lending, if HMRC really is clamping down, the future looks bleak for firms with financial difficulties.
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