Corporate insolvencies: Darwinian theory takes effect as figures increase by more than 50%

Commenting on the announcement of the Insolvency Services' corporate insolvency quarterly statistics at the beginnin of May, Ian Corfield, Restructuring Director for KPMG in the Eastern Counties said:

'The jump of over 50% on last year's figures is a staggering reminder of how quickly the recession has knocked down many businesses in its path. The manufacturing industry makes up the second largest number of all insolvencies and has seen a rise of 28% in the last quarter (257 up from 201); paper publishing and printing has seen the largest increase at just under double last quarter's numbers (51 up from 28). These figures highlight the severity of the problems seen in retail and manufacturing, which have been battered by the drop off in consumer demand.

Commenting on the hotel and restaurant sectors, Ian Corfield added:

"While the hotel and restaurant sector makes up a small percentage of the overall figures, the most dramatic increase of nearly 300% has been seen in hotels (31 went into administration this quarter compared with 11 in the previous quarter). It is interesting to note that bar insolvencies have gone down by nearly half (13 down to 7), giving credibility to the theory that aggressive promotions are buoying the industry."

Looking ahead, Ian Corfield commented:

"Unfortunately we are seeing companies with nowhere else to go failing as their backers, realising that they are throwing good money after bad, snap the purse closed. The financial sticking plasters which were applied to struggling companies when liquidity was still available are now coming away and lenders are unwilling to reapply them. We expect to see the rate of insolvencies gathering pace over the coming months as the Darwinian theory takes effect in the corporate world. Interestingly the CVA figures are fairly stagnant (156 compared with 149) but this could change with the approval of the JJB CVA. We may now see more compromise deals being struck between companies and their creditors to avoid insolvency.'

Ian Corfield can be contacted via e-mail at : ian.corfield@kpmg.co.uk