Company liquidation levels rise

Liquidations and insolvencies rose by 12.5 and 11.7 per cent respectively year on year in the UK during the second quarter, according to the Department of Trade and Industry (DTI).

There were 3,342 liquidations in England and Wales during Q2 2005, ended 30 June, which comprised of 1,286 compulsory liquidations, an increase of 14.6 per cent of the previous quarter, and 2,056 creditors voluntary liquidations.

A representative for the liquidation service at the DTI said that while figures for liquidations and insolvencies may have risen, they are still at a relatively low level.

"Liquidation numbers are still at a historically low level, though should be considered alongside the continued increase in administrations which is now the main vehicle for corporate business rescue," the representative said.

The number of administrations also rose by 44 per cent compared to the same quarter last year, according to the DTI's report.

However, the report identified that whilst 0.7 per cent of active companies went into liquidation during Q2, that figure had actually dropped by 12.5 per cent, compared to the same period last year.

"The decrease in the percentage of active companies entering liquidation has either remained the same or fallen in every quarter since 1997," added the representative.

Eddie Pacey, director of credit at Bell Microproducts Europe, said insolvency is rising because of uniform margin pressure in the channel, compounded by relatively low sales activity.

"The IT industry will probably see an increase in insolvencies in the third quarter, but a slow down in the fourth. OEMs and sub-distribution commonly suffer liquidations and it often has a knock on effect," he said.

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