09 February 2009 | Paul Snell
The number of companies going out of business will reach a peak in 2009, according to figures released by the Insolvency Service.
It found 2,018 businesses went into administration in the fourth quarter of 2008. Although this figure includes the appointment of one administrator to cover 729 managed service companies, when this is discounted the revised figure of 1,289 is still 124 per cent higher than the 575 new administrations seen in the equivalent period 12 months earlier.
The number of companies declared insolvent also rose by more than 50 per cent compared with 2007, recording 4,607 in the fourth quarter.
"These numbers are bad, but they are going to get progressively worse as business and consumer confidence continues to fall," said Malcolm Shierson, partner in the recovery and reorganisation practice at Grant Thornton. "Companies across all sectors will struggle when they need to refinance their debt as lenders rein back on corporate lending."
R3, the insolvency practitioners' association, said 19,796 businesses will become insolvent this year before a slight fall next year to 19,202.
"An overwhelming majority of insolvency practitioners believe that this downturn will be deeper than the 1990s recession; over two thirds think this one will last longer, and three quarters think more businesses will close this time around," said R3 president Nick O'Reilly.