Company administrations rocket as the credit crunch bites

The latest figures released by The Insolvency Service show that the number of businesses being forced into Administration or Receivership by their creditors has surged in the first three months of 2008.

Insolvency experts at PKF point out that the Government figures for the first quarter of 2008 show that the number of Administrations rose to 858, 54.0% higher than the previous quarter and 22.7% above the same period in 2007. The number is the second highest quarterly figure since the Enterprise Act of 2002 changed the rules governing Administrations.

Receiverships rose to 273 in Q1 of 2008 - the highest level since 2003 - 85.7% higher than the previous period and 145.9% higher than a year ago.

PKF Corporate Recovery Partner, David Merrygold said: “These figures should be of huge concern as they’re a barometer of business failure and show that the temperature is rising. While the Government chooses to focus on liquidations, which show single digit percentage increases, the numbers of companies being forced into Receivership or Administration by their creditors is rocketing.

“Clearly the credit crunch is having an impact and banks are increasingly wary of lending more money to businesses they don’t regard as cast iron while other creditors are tightening their payment terms with many starting to demand cash up front from all but their most trusted clients.

“The reality is that the thousands of small and medium sized enterprises that make up the backbone of the British economy are going to face increasing difficulty as cash flow is starting to dry up. And most businesses had not expected major fuel price hikes, with gas, electricity and diesel costs in particular adding significantly to their costs.

“Regrettably, I think these figures are the tip of the iceberg and likely to get increasingly worse this year.”