R3, representing the Insolvency Profession, is concerned by figures released on Friday by the Insolvency Service on corporate insolvencies which show a 53% increase in Receiverships. This is a jump from 177 Receiverships in the second quarter to 270 in the third quarter, an indication that repossession of commercial property is on the increase.
“Companies buying or selling property are being squeezed by a reduction in prices and a shortage of buyers,” said R3’s President, Nick O’Reilly. “A bank trying to recover lost assets will appoint a surveyor which shows up as a Receivership. We have all known for some time that the property and construction sector has been badly hit by the downturn, and these figures are evidence of that.”
Today’s figures indicate that overall, the number of corporate insolvencies for just three quarters of 2008 now stands at 15,164 which is almost as much as the figure cited by R3 for the entire year. In October, R3 members predicted a rise from the official figure of 13,091 corporate insolvencies for 2007 to 15,693 for 2008.
Rises are expected to continue into 2009 with 18,440 company insolvencies predicted. This would translate as a massive 41% increase in business insolvencies from 2007 to 2009. These predictions were made in a survey of the Insolvency Profession last month in conjunction with the polling agency ComRes.
“The Insolvency Service figures are worse than we expected. However, there will always be a ‘lag’ in filtering through and it won’t be until the end of 2009 that we will start to approach the numbers we saw at the peak of the last recession in 1992.
“For the last three or four years a number of businesses that perhaps were not performing well have been kept alive artificially by the easy availability of credit, which has now dried up. Businesses which are more vulnerable will fail.”
There are also concerns about the reported figures of 27,087 personal insolvencies for this quarter, which marks a jump in the number of bankruptcies and IVAs. “Again, these figures show that Insolvency Practitioner’s predictions of a 22% rise in personal insolvencies between 2007 and 2009 is worryingly on track,” said Nick O’Reilly. “Traditionally the route into personal insolvency is not an overnight process and unsurprisingly people will put off dealing with financial problems until they have exhausted all other options.”
Source: R3, which is the trade body for Insolvency Professionals, and is made up of 97% of the UK’s Insolvency Practitioners from all over the UK. www.r3.org.uk