Company failures fall in first quarter: Small firms warned of continuing problems

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The Independent Online
COMPANY collapses in England and Wales fell by 5 per cent to 5,705 in the first three months of 1993 compared with the previous quarter and by 2 per cent on the same period a year ago, suggesting that the economy is further along the road to recovery than generally believed.

However, insolvency specialists warned that small companies in particular could still face big problems in trying to cope with expansion after such a long period of retrenchment.

For the year to the end of March total company insolvencies were 24,334, representing 2.6 per cent of the number of active companies, according to the latest quarterly survey from the Department of Trade and Industry.

Individual bankruptcies are still on an upward trend. In the first quarter there were 10,233, up 4 per cent on the previous quarter and 17 per cent on the same period a year ago.

Insolvency specialists explained that individual bankruptcies tended to peak later than company collapses because bankruptcies usually happened after lengthy legal attempts to recover debts from individuals. Putting companies into liquidation is usually a much speedier process.

Richard Brown, director of policy for the British Chambers of Commerce, which publishes the quarterly insolvency figures for the DTI, said: 'These figures are much better than expected. However, levels of company insolvency remain unacceptably high and, for the third quarter in succession, represent 2.6 per cent of all actively trading companies.'

Janice Buck, chief economist at the Institute of Directors, said: 'These figures indicate that the recovery may be further along the track than we thought. Recovery from past recessions has always been accompanied by an acceleration in unemployment levels and firms going out of business.

Allan Griffiths, head of insolvency at accountants Grant Thornton, warned: 'It is not a great reduction. There may well be no fantastic reduction until well past the recession'.

(Graph omitted)