Bob Young, a corporate recovery expert and partner at Begbies Traynor, says the bottom of the recession is not yet in sight.
According to the firm’s own figures, a staggering 4,566 companies faced “critical” problems – those with county court judgments totalling over £5,000 or winding-up petitions against them – in the third quarter compared with only 791 in the same period last year.
Additionally, the number of companies with ‘significant’ problems – those with a court action and/or average, poor, very poor or insolvent or outdated accounts –nearly doubled to 58,564.
Mr Young, who is also president of North Staffordshire Chamber of Commerce, pointed out that insolvency statistics were a lagging indicator.
“The insolvency figures follow the economy by six to 12 months,” he said.
First come the job losses – in the Midlands the likes of Jaguar Land Rover, JCB and van maker LDV have announced big cuts in recent weeks.
Financial services posts among the major banks are being axed in their thousands across the country.
And the housing market has tumbled with estate agents, builders and the like all decimated.
Mr Young predicted Government insolvency figures – already on the rise – would be up again in the fourth quarter and higher still for the first quarter of next year.
And he cautioned that a recovery was unlikely until homes started moving once more.
“The economy is driven by property,” he said. “That is the sector which has to come back.
“But until the banks and building societies feel they can lend money again then things are not going to improve.”
Purchasers would only return at the point they felt the price fall had reached the bottom.
Many were struggling to get a mortgage or being told they could only have 75 per cent of what they needed. First time buyers could not get on the ladder.
“The market is in a desperate state,” he said.
And it had a spin-off into associated sectors – conveyancers, small builders, white goods, carpet sales and many others.
Mr Young went on: “In previous recessions it hurt and it shook out the weak ones. But the big problem this time is we are seeing a lot of good businesses failing.”
And that was simply down to cash – the lack of overall liquidity.
“People need to realise we are just going into the recession and they need to prepare for a fairly long and hard road.”
Government figures for the third quarter showed there were 4,001 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales on a seasonally adjusted basis. This was an increase of 10.5 per cent on the previous quarter and 26.3 per cent on the same period a year ago.
There were 27,087 individual insolvencies, a jump of 8.8 per cent and an increase of 4.6 per cent on the same period a year ago. This was made up of 17,341 bankruptcies – ahead 12.1 per cent on the previous quarter and 9.5 per cent on the corresponding quarter of the previous year, and 9,746 individual voluntary arrangements, up 3.3 per cent and 3.1 per cent respectively.
The unemployment rate was 5.8 per cent for the three months to September, up 0.4 per cent over the previous quarter and 0.5 per cent over the year. The number of unemployed people increased by 140,000 over the quarter and by 182,000 over the year, to reach 1.82 million.
The claimant count was 980,900 in October, up 36,500 over the previous month and up 154,800 over the year.
Bob Young is senior partner at Begbies Traynor in Stoke-on-Trent, a fellow of the Insolvency Practitioners Association (FIPA) and a member of the Association of Business Recovery Professionals (MABRP) - and has over 30 years' experience of corporate rescue and recovery, turnaround and corporate and personal insolvency work. Formerly a partner in Poppleton & Appleby, a director of PricewaterhouseCoopers and Official Receiver in Birmingham, Bob has built up a substantial following in Staffordshire and beyond, and he chairs the North Staffordshire Chamber of Commerce Business & Finance Committee.