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Better Company Insolvency Figures Hiding True Picture- 11/11/2010
The better than expected results from the Insolvency Service (published last Friday - 5 November) which show a sharp fall in both company liquidations and administrations are hiding the true picture of many businesses continuing to struggle in tough trading conditions, says a leading Wolverhampton litigation lawyer.
According to the Insolvency Service company liquidations were down by almost 14% and administrations by 35% on this time last year.
Guy Birkett, Partner and Head of Litigation at West Midlands law firm FBC Manby Bowdler LLP, says that despite the improved insolvency figures, maintaining a positive cash flow remains a major challenge for many companies.
He says: “Although the economy continues to grow albeit slowly, the increase in VAT in January will undoubtedly have a negative effect on trading conditions and cash flow for a lot of companies, with many relying on a good Christmas period to stay in business.
“Her Majesty's Revenue and Customs have already assisted a number of companies to survive by agreeing additional time to pay tax which is owed. Whether HMRC’s willingness to agree to such arrangements will continue as more companies need help in the coming year remains to be seen.”
According to Mr Birkett, one sector which will continue to be hit hard by business failure is professional services.
He says: “Unlike previous recessions, our experience of the insolvencies that we have dealt with is that the service and professional industries have been greatly affected by this recession.
“With there having been significant high profile collapses of both accountancy and solicitors practices over the last six months, we are expecting that there will be further failures and consolidation within the professional services sector in the coming year.”
With 36 partners, FBC Manby Bowdler is one of the largest law firms in the West Midlands. The firm has offices in Wolverhampton, Willenhall, Telford, Shrewsbury and Bridgnorth.