Administrations drop to lowest level since 2005 in first quarter of this year

The number of British companies entering administration is at its lowest level since 2005 despite continued turmoil on the high street.

Figures from the accountants PricewaterhouseCoopers suggest the health of UK businesses is stronger than expected at the end of a quarter that saw established retailers such as Blockbuster, Jessops and HMV collapse. PwC said the number of administrations across the country fell 32 per cent to 490 during the three months ending 31 March, compared with the same period in 2012.

Overall, the construction, manufacturing and retail sectors are still the worst hit by the economic downturn, with retail in particular failing to follow the overall downwards trend.

The North-east and Cumbria and the North-west were the only two areas since the last quarter of 2012 to record a rise in insolvencies – a term that also covers Company Voluntary Arrangements.

Mike Jervis, a partner at the accountancy firm PwC,was bullish about the outlook for UK companies. "Administrations have dropped below the 500 mark for the first time since 2005, alongside other insolvency processes. Perhaps this is an early sign of confidence returning and also maybe a sign of some economic recovery," he said.

"Some believe that the period of recovery immediately after recession creates more company insolvencies as asset values rise because creditors can take advantage of this and management over-trades. I don't believe this will happen this time – management teams and stakeholders are sophisticated, responsible and measured and have learnt some hard lessons".

He added: "The challenge now is for the survivors to work out how to grow in what remains a stagnant UK environment."