Insolvency rates close to 10-year high

The number of insolvencies in England and Wales jumped to its highest level in almost a decade last year, according to an report published yesterday.

The number of insolvencies in England and Wales jumped to its highest level in almost a decade last year, according to an report published yesterday.

The number of company failures rose 7.7 per cent in 2003 from the previous year to 50,500, according to credit insurance group Euler Hermes. That compared with a drop in the US and a slowing rate of increase in Europe. The main contributors to the rise were sole traders, which saw insolvencies rise by 19 per cent last year - accounting for almost two-thirds of the annual total.

By contrast, the number of corporate bankruptcies declined, finishing the year 13 per cent below 2002 levels. The industries that saw the biggest improvement were retailing and agriculture. Conditions worsened, however, in the services, transport-communications and wholesale trading sectors.

David Atkinson, country risk manager at Euler Hermes, said: "The generally good macroeconomic prospects should contribute to a further fall in company business failures and a progressive stabilisation in individual bankruptcies."

But he forecast the total number of bankruptcies would stay close to 2003 levels in the short term, rising 2 per cent to 51,300 this year and a further 0.2 per cent in 2005 to 51,400.

The largest business failure in the UK last year was TXU Finance, in the electricity production and distribution sector which turned over £3.3bn and employed more than 3,000 staff. The figures come few days after data from Companies House showed that 54 per cent more companies failed in 2003 than five years earlier, in part reflecting recent increases in interest rates.

Companies House recorded a 12 per cent increase in business failures in 2001-02 and a 9 per cent increase in 2002-03. However, the gloom was offset by separate Companies House figures showing that the number of business start-ups has risen almost as fast in the past 12 months as in the five years leading up to 2002.

The number of business start-ups increased 34.5 per cent to 392,189 in 2002-03. This compared with an increase of 38 per cent between 1998 and 2002, and means that there were 86 per cent more new businesses started in 2003 than six years ago.