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Business failures leap as credit crunch hits companies

Experian reports a rise in UK corporate insolvency: up 8.5% in Q1 2008 compared to Q1 2007, in line with our last forecast here.

Business sectors identified as suffering include agriculture, banking, food retail and clothing (although some of the sample sizes are small), but 10% of the quarter's failures are in building and construction.

Regionally, the East Midlands is hardest hit with insolvencies up 53.6%.

Creditors' voluntary liquidations increased by 14.1% but compulsory liquidations fell by 2.2%, perhaps reinforcing concerns about confidence as debtors go for CVLs whilst fewer creditors are pursuing compulsory winding-up. The popularity of the procedures amenable to corporate rescue - administrations and company voluntary arrangements - continues with growth of 23.7% and 37.6% respectively.

My own experience is that more businesses are considering an insolvency procedure than either 3 or 12 months ago. Certainly, businesses cannot borrow their way out of trouble at the moment and the signs are that advice about facing insolvency is being sought earlier - offering more prospect of a constructive solution.



Date: 9th April, 2008
Author: Chris Laughton


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