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Alarm over rise in companies failures.

Byline: By SION BARRY Western Mail

The uk is experiencing its fastest growth in the number of limited businesses failing, according to the latest figures information solutions company Experian. In the first three months of 2006, corporate failures increased by 15.3% to 4,818 - the highest quarterly increase recorded since 1999. Wales experienced the biggest increase in company failures compared to the first quarter of 2005 with a rise of 65%, up from 69 to 111.

There has also been an increase, for the first time since the first quarter of 2002, in the number of companies going into compulsory liquidation. Compulsory liquidation is when the court makes an order for the company to be wound up on the petition of an appropriate person - the director(s) of the company or a creditor.

Administration orders are also on the increase - up 55% the same period last year.

Richard Lloyd, managing director of Experian's business information division, said, 'This increase of 15.3% is alarming. In 2004, the UK recorded the lowest number of corporate failures since 1998, but insolvency rates have now been rising at an increasing rate since the last quarter of 2004.

'These latest insolvency figures really reflect current market conditions and illustrate some of the threats that businesses, especially in certain sectors, are experiencing.

'No region has bucked this trend. In fact, every UK region has seen an increase in the number of businesses failing, with all the fallout, including lost jobs, that entails.'

In total, 4,818 companies failed during the first quarter of 2006, compared with 4,180 in the first quarter of 2005.

Voluntary liquidations increased by 3.9% over the same period, administration orders by 55%, compulsory liquidations by 26.5% and receiverships by 9.7%. Only voluntary arrangements fell, by 24.2%.

Of the 34 industries surveyed by Experian, 22 recorded an increase in business failures in the first quarter of 2006. Most noticeably, among the larger sectors, these included building and construction (up 17%), information technology (up 39%), food manufacturing (up 26%), media (up 35%) and food retailing (up 52%).

Business services continued to record the highest number of failures - 965, compared with 724 in the first quarter of 2005 - representing an increase of 33%.

Mr Lloyd said, 'Following the sharp rise in corporate insolvencies in 2005, we predicted that the increase would continue into this year, and we see no reason for the insolvency rate to slow down this year. Rising insolvencies can have a knock-on effect of bringing down more businesses with them.

'As more companies go under, their suppliers are left with bad debts, which will, in some cases, tip the supplier over the edge, resulting in even more job losses. In order to safeguard their future, businesses need to be vigilant to the threat of insolvency and should ensure that best practice is followed when it comes to credit management.'
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Geographic Code:1USA
Date:Apr 28, 2006
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