Growth too slow to halt record company administrations

Having studied the latest figures from the Insolvency Service, Grant Thornton is predicting a glut of company failures in England and Wales during 2010.

Last year saw a record 4,161 companies placed in administration (up 1.7% on 2008) and the accountancy firm warns: “There is no light at the end of the tunnel for troubled companies that are relying on a fast economic recovery to help them repair their balance sheets.”

Even though the recession is technically over, growth was minimal and the risk of the double dip recession remains real, according to Grant Thornton.

The firm’s Recovery and Reorganisation partner, Malcolm Shierson, adds: “Sadly, we cannot expect the number of administrations to drop significantly below its historic highs until Britain’s economic output far outgrows its pre-crisis levels.”

Mr Shierson’s view takes into account that fact that the number of troubled companies dropped in the fourth quarter of 2009, compared to the earlier quarter.

However, he explains: “While this is good news, the number continues to be near an historic high and we expect the number of liquidations to shoot up even further when the future government stops extending the ‘Time to Pay’ tax scheme.”

The Partner concludes: “There is as yet, little sign of liquidity returning to the banking sector, and that will be key to any return to normality.”

The fallout from the ending of HM Revenue & Customs “Time to Pay” scheme has also been mentioned by Begbies Traynor.

The recovery specialist recently predicted a significant rise in company failures in the year ahead (most probably from Q3 2010 onwards), assuming the scheme comes to an end.

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