Channel braces for insolvency surge

Upbeat official figures could mask underlying problem

Hitting the wall: R3 expects UK insolvencies to rise by six per cent this year

Despite upbeat first-quarter corporate insolvency figures, onlookers have warned UK plc to expect a hike in business failures over the remainder of the year.

Numbers from the Insol­v­ency Service released earlier this month revealed 4,082 firms across England and Wales succumbed to liquidation in Q1. This figure is down 18 per cent on the corresponding period last year.

There were 1,343 other corporate insolvencies during the quarter, comprising 356 rec­ei­verships, 783 administrations and 204 company voluntary arrangements. Administra­tions were down by more than 40 per cent annually.

But Nitin Joshi, founder of ChannelMoney, cautioned that despite the drop, there are still many insolvencies in the pipeline.

“Banks are not lending and trade credit is tight,” he said. “The austerity measure may well mean discernible reduction in channel spend. If that happens, it will only mean more businesses going bust.”

Insolvency trade body R3 has also suggested that the corporate insolvency reduction masks a continuing problem. R3 indicated to CRN that its members expect 2010 full-year corporate insolvency numbers to reach 28,057, up six per cent on last year’s figure of 26,443.

The trade body said ambitious firms’ growth plans could be stymied by the scarcity of finance.

Adam Harris, chief executive of trade body the Techno­logy Channels Asso­ci­ation, said he did not expect the avai­lability of finance to tangibly increase soon.

“This will mean that smaller resellers are going to be a lot more cautious,” he said. “Those resellers that are entrepreneurial will be creative with financing. You need to keep lines of communication open with both creditors and debtors.”