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August 31st - 2010
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Corporate insolvency statistics fail to show full effect of recession in Yorkshire and the Humber
The latest figures for corporate insolvencies for the second quarter of 2009 released today do not show the full impact of the recession, according to R3, the trade association for insolvency practitioners.
R3 believes that one factor keeping numbers low could be HMRC's "time-to-pay" arrangements, of which there are 13,820 in Yorkshire and the Humber alone, totalling around £240m in businesses taxes, which include corporation tax, VAT, and PAYE. [Source: HMRC]
President of R3, Peter Sargent from Begbies Traynor in Halifax, explains: "A unique factor in this recession is the lenient stance taken by HMRC on business debt, with the provision of extended breathing space for companies to sort out their cash flow problems. These 'time-to-pay' arrangements can be effective in cases where the company directors use the time to reassess and sort out the company's finances. Unfortunately though, there is anecdotal evidence from our REGION members that some companies with these agreements may be in danger of trading while insolvent."
Company directors must plan for the time when the deferral ends and make sure that they can pay the final bill. Those that don't, run a serious risk of adding to what we fear will be a glut of failures when the time-to-pay concession runs out and the recession continues.
Another concern is that one company's insolvency can have a knock-on effect on their suppliers, who may find themselves over-exposed as they might not have realised the company was in financial difficulty. We believe that professional advice must be made mandatory to all companies who are given time-to-pay arrangements.
In a recent survey 95% of R3 UK members revealed that they fear the full impact of this recession has yet to be translated into the official insolvency figures. During the last recession, the peak for corporate insolvency procedures was 1992; some three years after the recession had started.
R3 is also predicting that any rise in corporate insolvency will be accompanied by a rise in personal insolvency since the two often rise hand in hand.
