Fewer firms collapsing as economic picture brightens

The number of companies going bust has fallen in the third quarter of 2013 as the UK economy continued to show signs of improvement, says the Insolvency service.

A total of 3,875 firms were liquidated in the third quarter, marking a fall of nearly 3 per cent on the previous quarter and a 2 per cent drop on the same period a year ago.

In addition there were 949 other types of corporate insolvency – short of full liquidation – during the quarter, a 3 per cent reduction on the previous quarter and a 4 per cent drop on the same period last year.

According to experienced market watchers the drop-off in insolvencies is somewhat surprising because there is traditionally a time lag between the economy picking up and a dip in the number of firms going bust.

Phillip Sykes, deputy vice-president of insolvency trade body R3, said: "The decrease in corporate insolvencies is slightly surprising. Economic recovery usually heralds an increase in insolvencies." As for how firms are bucking this trend, Mr Sykes reckons they are receiving a helping hand from their employees.

"Although we've heard reports of creditor pressure increasing, businesses may also be receiving a helping hand from their employees. Employees making sacrifices to keep their employer afloat was not uncommon during the depths of the recession."

However, there was poor news on individual insolvencies. Although straight-out bankruptcy was down a fifth year-on-year, the number of individual voluntary arrangements issued, a type of insolvency, was up markedly. The number of people entering insolvency rose for the second consecutive quarter to 26,030 but was 7.3 per cent fewer than 12 months ago.

A report by the TUC said the recovery had passed most people by. The general secretary Frances O'Grady told conference the economy has grown by £60bn in the past four years, but real household disposable incomes have risen by only £1bn.

A total of 3,875 firms were liquidated, a fall of nearly 3 per cent on the previous quarter