For over a year now I have been saying that we are coming out of recession.
I have read many articles about how coming out of the recession knocks over the “zombie companies” (personally, I don’t like that term, it’s not a fair description).
Maybe coming out of the recession in the early 1990’s did cause a rise in failures, but the current recession has lasted so long with the run on Northern Rock Bank in 2007, that most companies expected to fail, have already failed.
I also think the banks do not want the bad press of calling in debt, so they are very reluctant to do so, unless they absolutely have to. That’s very different from how they were in the early 1990’s.
The Insolvency statistics released by the Insolvency Service on the 29th July also show that the number of corporate failures is down in the second quarter of 2014. Creditors Voluntary Liquidations are down 5.9% and Compulsory Liquidations are down 9.4% (this latter type of liquidation is Court driven whereby a creditor owed money pushes the company into liquidation, hence the term compulsory).
The statistics also show that in 2013, the 12 months ending 30th June, 1 in 167 companies entered into liquidation. In the year to 30th June 2014 this was down slightly to 1 in 177.
So the risks then are a bit like Russian roulette, but rather than a 1 in 167 chance a company now has a 1 in 177 chance of liquidation. Slightly better odds but who wants to play that game?