Slightly more positive insolvency figures released

Slightly more positive insolvency figures released

There has been some slightly positive news for UK firms this week, with the latest figures showing that the number of personal insolvencies has decreased with only a small increase in the number of businesses seeking insolvency advice.

According to insolvency practitioners' trade body R3, the figures may come as a surprise to some, with the turbulent eurozone and continuing problems in the UK causing a great degree of trepidation in the finance world.

President Frances Coulson noted that "it can only be an encouraging sign that personal insolvency has decreased".

She noted that the data shows a peak in individual bankruptcies in early 2010, but warned against complacency, stating that further increases are possible.

"A flattening in corporate insolvency comes after the latest 0.5 per cent growth figures, however, indications suggest that it will be a slow, sluggish recovery that is likely to take between three and five years, and these insolvency figures are still higher than twelve months ago," the expert claimed.

"Insolvency numbers remain historically low compared to the levels seen after previous recessions, this is largely a result of the value of business assets currently too low for creditors to pursue – they simply will not cover the debts they are owed."

Ms Coulson added that many organisations are being allowed to operate as 'zombie' enterprises, with creditors expected to pursue what they are owed as soon as the country enjoys a period of sustained growth.

Such businesses should bear this in mind and ensure that they are ready for the demands for finance to be repaid when the time comes to avoid being handed a winding-up order.

"R3's Business Distress Index revealed over four in ten businesses (43 per cent) are experiencing decreased profits," the organisation's president noted.

"While current stresses may not be enough to push businesses over the edge, a prolonged period of distress will trigger an increase in formal insolvencies."

Meanwhile, R3 recently reported that 22 per cent of Britain's businesses are regularly making use of their maximum overdraft facility, risking their financial stability.

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