A leading South Yorkshire insolvency expert has warned of a risk of a rise in corporate insolvencies in the new year.
The Government Insolvency Service third quarter figures show a slight decline in all forms of corporate insolvency and a big decline in the number of administrations (down 35 per cent on this time last year and 19 per cent down from the previous quarter).
Insolvency solicitor Steven Fennell, partner at the Sheffield office of international litigation and dispute resolution law firm Kennedys, has claimed that while the decline in corporate insolvencies shows a positive change in business attitudes, there is still reason to remain cautious.
Mr Fennell said: “The fact that corporate insolvencies are not increasing is an indication of how realistic all the stakeholders in private sector businesses have been.
“Employees have co-operated to cut costs, trade creditors and banks have been realistic about customers in difficulties and management have been pro-active in responding to a serious recession.
“While there is reason for businesses to be positive about these figures, they should be read with extreme caution.
“HMRC has been offering time to pay schemes for businesses in difficulty, but their attitude has become more strict and less flexible. There is a risk of an increase in insolvencies starting next year because of this.”
There has also been a slight decline in personal insolvencies, with bankruptcies down 3.7 per cent on last year, but personal insolvencies are still far higher than they were in the recession of the early 90s and have in fact trebled since 2003.
Only 12.8 per cent of personal insolvencies are self-employed people. The vast majority of the others will be people struggling with consumer debt.
Mr Fennell added: “The huge number of personal insolvencies highlights the growing problem of personal debt in society as a whole, and is to some extent the mirror image of the good corporate results. Consumer spending is still comparatively strong and this is still being funded by personal debt.”