23/04/2009 10:15

EMBARGOED UNTIL 00:01 FRIDAY 24 APRIL

The latest PwC analysis into corporate insolvency numbers show that the downturn is showing no signs of abating as more than 5,483 companies became insolvent in the first three months of 2009. This represents a 14% increase on the previous quarter and a huge 57% increase of the same quarter of 2008.

Mike Jervis, partner in the business recovery services practice at PricewaterhouseCoopers LLP, commented:

“We can see that UK businesses are still suffering from the effects of the global recession as more and more of them enter into insolvency with no apparent signs of a slowdown in the near future.

“At PwC we are currently working with businesses across the UK, in many sectors and of varying sizes, unfortunately we still find that many companies are leaving it too late to ask for help. Where rescue capital is a scarce commodity, it is obvious that the sooner problems are recognised, a solution is more likely to be achievable – and that solution doesn’t have to be insolvency. There are, for example, cash management and other techniques which can mean the difference between survival and failure.

Which sectors are struggling the most?

No surprise that the worst affected sectors continue to be Construction (829 companies), Manufacturing (734), Retail (705), Hospitality & Leisure (312) and Real Estate (235) - all of which are showing a 5 year high.

Commenting on the real estate figures, Barry Gilbertson, partner in the property team at PricewaterhouseCoopers LLP, said:

"Although the actual number of insolvencies are down on the last quarter, from 275 to 235, the figures for January, February and March show an upward trend for each month, giving a monthly average about three times higher than in 2007.

“Banks and other lenders are at a critical point in the recessionary cycle. The more property companies that they allow to fail, then the more properties are likely to come onto a market already flooded with property for sale, thereby increasing supply and decreasing the likely sale price due to the lack of available credit to fund purchases. Cash buyers will chase bargains, especially where it is believed that banks are desperate to sell.

“Belief in the quality of existing management, or in the ability of administrators and receivers to manage the assets effectively, will be critical to any bank's decision to sell now or hold for enhanced value over time. Experience of a recessionary market and the relevant property expertise are rare but valuable commodities in the fight to minimise loss."

Across the UK…

Our analysis shows that London has the highest number of insolvencies with 1,323 which, although a 20.3% increase on the same period last year, is not as much of a increase as we saw in Q4 2008. The West, South West and Scotland all showed slight decreases for this quarter compared to the previous quarter with 176, 69 and 144 insolvencies respectively. Compared to the same quarter last year, all regions showed a material increase, but Wales is showing the lowest increase with 26.8%. The region showing the highest increase on the same quarter last year is the East with 328 insolvecies – representing a massive 75.4% increase on Q1 2008.

Mike Jervis, partner, summarised:

"The actual insolvency statistics show only part of the picture. There are many restructurings either not involving insolvency or using light touch insolvency techniques to salvage viable businesses.

"Those businesses most likely to survive the recession will turn to management teams and advisors experienced in turnarounds. They will plan for different scenarios and they will be obsessive over their cashflow management."

ENDS

1. For further information on the current economic climate from PricewaterhouseCoopers, please visit http://www.managinginadownturn.com

2. The insolvency figures have been collated by PricewaterhouseCoopers LLP and are based on Administration, Administrative Receivership, Company Voluntary Arrangements and Creditors’ Voluntary Liquidation appointments in England, Scotland and Wales during the first quarter (January, February and March) of 2009. For the purposes of this data collation, where a group of companies entered into insolvency that group has been counted as one appointment.

3. These figures do not include a one off exceptional situation in October 2006 where 850 businesses filed for insolvency in one day as part of a carousel fraud.

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