The number of troubled companies falling into insolvency has dropped, with 783 being placed into administration in England and Wales in the first quarter of 2010, according to statistics released today by the Government”s Insolvency Service.

“People will be relieved that there has been a drop in the number of business failures in the first quarter of this year. Unfortunately, we expect to see an increase in administrations now that the general election is over,” commented Malcolm Shierson, Partner at Grant Thornton”s Recovery and Reorganisation practice.

“Whomever forms the next government, UK economic growth will be hampered by projections reductions in public spending and a likely increase in taxes. It is likely that lenders will take a tougher stand on struggling enterprises, which may also be squeezed as ”Time to Pay” Tax schemes are phased out.”

The latest number of administrations represent a fall of 7.8% on the previous quarter (849 in Q4 2009 and a staggering fall of 40.3% against the same period in the previous year (1,311 in Q1 2009).

Company liquidations in England and Wales also dropped to 4,082 in Q1 2010. This figure reflects a fall of 8.4% on the previous quarter (4,457 in Q4 2009) and a fall of 17.8% against the same period in the previous year (4,964 in Q1 2009).

“The health of the UK economy is mainly reflected in the number of administrations. Typically large employers are placed in administration when they run into trouble, whereas liquidations are more common among smaller enterprises,” concluded Grant Thornton”s Malcolm Shierson.

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The Labour Party won the 2005 UK general election with 35.3% of the popular British vote. The Conservative Party was just a few points behind with 32.3% of the votes, but because of the first past the post voting system, the Labour Party had a significant majority with 356 parliamentary seats (MPs) compared to 198 seats for The Conservative Party.

Just over 4 years on with political scandal after scandal, all political polls point to a Conservative win at the 2010 general election with speculation of a possible Hung Parliament.

How will you vote in today’s General Election?

If you are still unsure who to vote for, please take a moment to examine where the three main parties stand on all of the key issues by viewing the Party Policy Guide.

Let the best party win!

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Most companies would have to report higher pensions costs under proposed changes to accounting rules from the International Accounting Standards Board (IASB) contained in the exposure draft issued on the 29 April.

PricewaterhouseCoopers LLP (PwC) estimates that combined pensions costs for UK companies would rise by £10bn, with a corresponding decrease in reported profits. PwC is, however, supportive of the improved transparency on pensions disclosure that the changes would bring.

Brian Peters, partner, PricewaterhouseCoopers LLP, commented:

“The proposals in this morning’’s exposure draft would radically change the way organisations are required to account for their pension costs in company accounts and would hit the profits of companies with UK or overseas defined benefits pension schemes. A company with a £2bn pension scheme would typically see reported pension costs rise by about £25m a year.

“We are likely to see resistance to the accounting changes from companies in both the UK and rest of Europe, and some people are very concerned on the further impact on company motivation to provide defined benefit pensions, in both the UK and abroad.

Nonetheless, those changes designed to provide transparency and consistency are to be welcomed – transparency improves both long-term confidence of investors and business decision-making.”

PwC will respond to the exposure draft consultation. The changes relate to the pension accounting standard known as IAS 19

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With the latest unemployment figures, new research by ComRes estimates that the UK’s insolvency industry helped to save nearly two million jobs in companies going through insolvency and rescued around six thousand (5,851) businesses last year. Furthermore, the UK’s Insolvency Practitioners who work on corporate insolvencies spend nearly a quarter of their time on preventing insolvencies, work which cannot be made public for fear of damaging the value of the businesses concerned.

“One might assume that when an Insolvency Practitioner (IP) walks through the door of your business, it is time to clear your desk, but the reality is very different,” says R3’s incoming President Steven Law. “If the IP can get in early enough, often the business, or parts of the business, can be saved by insolvency procedures such as administration or Company Voluntary Arrangements (CVAs). Two million jobs equates to around 7% of the working population. Also an overlooked part of our role is helping businesses and individuals avoid insolvency in the first place.”

Other research by the cebr also demonstrates the vital role the insolvency industry plays in creating an environment in which “creditors are willing to lend, entrepreneurship is encouraged and the economy can flourish”. World Bank data shows there are only 6 countries in the world where the amount recovered for creditors in an insolvency is higher, extracted over a shorter time and at a lower cost than the UK (Japan, Singapore, Norway, Canada, Finland and Belgium).

Steven Law concludes: “We rank above the US on these criteria, which highlights that during this recession, the insolvency regime has generally performed well. World Bank data showed the UK insolvency regime was able to recover 84 cents in the dollar for creditors and only at a cost of 6% of the value of the estate.

“This latest research also showed that the UK insolvency industry made a direct contribution of around £562 million to national GDP. It is time to think of the profession as financial healthcare specialists rather than corporate undertakers. The earlier a company director faces up to their financial problems, the better the diagnosis is going to be.”

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking here.