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Insolvencies at lowest level since 2005, says PwC

Administrations are at their lowest levels since 2005, despite a start to the year that has seen a number of major high street retailers enter insolvency.

According to PricewaterhouseCoopers, there were 3,285 insolvencies in the first three months of 2013, down from 3,657 in Q4 2012 and 4,412 in the first quarter of 2012.

Administrations fell by almost a third from 724 in Q1 2012 to 490 while company voluntary arrangements (CVAs) dropped to 104, their lowest level for 10 years.

Looking at consecutive quarters, construction (Q1 2013: 625, Q4 2012: 658), retail (Q1 2013: 407, Q4 2012: 400) and manufacturing (Q1 2013: 388, Q4 2012: 444) were the hardest hit sectors in terms of insolvencies.

The statistics suggest that conditions are generally improving for businesses, but also reflect the difficulties being faced by a retail sector failing to follow the overall downward trend.

Mike Jervis, retail expert and partner PwC, said: "Administrations have dropped below the 500 mark for the first time since 2005, alongside other insolvency processes. Perhaps this is an early sign of confidence returning and also maybe a sign of some economic recovery.

"CVA's have dropped to a level never seen before- this type of insolvency appears to have become less popular because many CVA's fail if they don't address the fundamental viability of the underlying businesses, and instead simply focus, say, on store closures.

“Some believe that the period of recovery immediately after recession creates more company insolvencies as asset values rise because creditors can take advantage of this and management over -trades. I don't believe this will happen this time- management teams and stakeholders are sophisticated, responsible and measured and have learnt some hard lessons.

“The challenge now is for the survivors to work out how to grow in what remains a stagnant UK environment."

 

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