Cluttons LLP - General Other - UK

Date: 08 Aug 2008

The number of failing companies in England and Wales rose sharply in the second quarter of this year as the credit crunch and economic downturn tightened its grip.

The Government's own Insolvency Service said 3,560 companies went into liquidation between April and June of 2008, an increase of 11.6 percent on the first quarter and an increase of 15.0 percent on the same period a year ago, their highest since 2003.

Commenting on the rise in insolvencies, Bill Siegle, Head of Commercial at Cluttons LLP said, "Rising insolvencies are always a worrying sign for the property market. Companies going out of business usually means more space coming back onto the market and putting downward pressure on rents whilst compulsory redundancies can only have a further adverse effect on an already fragile residential market".

While the actual number of reported insolvencies is approximately half that of the peak reached in the recession of the early 1990s, a steep rise in the number of firms in administration suggests more pain to come for the economy in general.

More than 1,500 companies were placed in administration in the first half of this year, 42 percent more than in the same period a year ago.

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