Channel feels pressure as insolvencies surge
Compulsory liquidations and creditors voluntary liquidations both increase at the end of last year
Company liquidations and individual bankruptcies rocketed in the fourth quarter of 2005, according to figures from The Insolvency Service.
The number of insolvencies in England and Wales rose by 8.5 per cent year over year with 3,187 company liquidations in the fourth quarter of 2005.
There were 1,285 compulsory liquidations, an increase of 13.6 per cent on the same quarter last year, and 1,903 creditors voluntary liquidations, a 5.3 per cent year-on-year increase.
Individual insolvencies grew by a huge 57.1 per cent from the same quarter of 2004, while bankruptcies also increased by 37.6 per cent over the same period.
Nitin Joshi, director at insolvency firm Vantis, said: “Evidenced by formal insolvencies in the past six months of small VARs to quite large businesses, these figures simply confirm what we all know. It is bad news.”
Joshi said sole traders and partnerships will be the first to suffer because lenders plan to exit the IT sector, which leads to personal bankruptcy for the stranded investors.
Steve Treharne, head of personal insolvency at KPMG, said: “Bankruptcy is outstripping company liquidations because of the spiral of debt in this country.”
Eddie Pacey, director of credit at distributor Bell Microproducts, said: “There has been a rise in channel insolvencies, but not firms of a significant size. It is hitting the smaller businesses. Insolvencies in the channel tend to be seasonal and are heaviest in the first and third quarters.”
Pacey said channel players with revenue of less than £7m are in the greatest danger of insolvency.
“E-tailers and retail are having a very tough time, but there is no channel business that is avoiding the squeeze. Smaller distributors are also struggling,” Pacey added.
However, Joshi said channel players should understand that there are options open to them.
“There is no excuse for channel players to bury heads in the sand. There are viable options available. Convergence and consolidation is not necessarily a foregone conclusion on a micro level. Directors need to think of survival strategies.”