1% fewer small companies, IT contractors and SMEs became insolvent in the 2nd quarter compared to the 1st quarter of 2010 according to the latest analysis from PricewaterhouseCoopers. 3,467 businesses became insolvent during the period, a drop of 28% from the same quarter last year.
PwC have seen a decrease in the number of companies going into administration as businesses seek alternative options such as restructuring their finances and making arrangement schemes.
Some sectors have fared better than others. There was an increase of 3% in the rate of insolvencies in the property sector whilst construction, manufacturing and retail also continue to struggle. However, these sectors have all improved on a year to year basis.
One of the main factors affecting the real estate sector is tenant failure. If a tenant defaults, the landlord still has to pay insurance, rates and service charges even though he is not receiving any rent.
London still has the greatest number of insolvencies at 869, but this is a 21% decrease in the same period last year. Cumbria and the North East have showed the most improvement, with a drop of 30% since the first quarter of the year.
There has also been a large decrease in the number of recruitment agencies and umbrella companies that were placed in administration. According to Recruiter, only 15 agencies went into administration during quarter 2 as opposed to 22 in the first quarter. Of these 15, 6 were based in the North of England.
Although this is good news for the recruitment sector as a whole, turnover is also decreasing with just one agency reporting a multi-million pound turnover in Q2 compared to at least six in Q1.
However there are warnings from business recovery and restructuring specialists that we are not out of the woods yet. Businesses must prepare themselves for all eventualities and this forward planning can make the difference between success and failure.
Profitability should be carefully monitored over the coming half year and if an agency foresees trouble they should contact HMRC as soon as possible to negotiate payment terms. Currently 14 recruitment agencies have winding up petitions against them and 63% of these were filed by the Revenue.
It is unsure whether the new government plans to end the Time to Pay scheme which has allowed recruiters to extend the payment period for tax debts.
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