Help To Buy Scheme Could Eventually Reverse Trend

A leading corporate restructuring lawyer believes that new insolvency statistics published by Experian are being influenced heavily by low interest rates and do not accurately reflect the true level of distress which exists within some parts of the UK economy.

Andrew Walker, a partner and insolvency specialist at the Leeds office of top 20 law firm, Irwin Mitchell, made the comment after it was revealed that business insolvency rates had fallen for the fifth consecutive month from 0.08% in September 2012 to 0.07% in September 2013.

The latest Business Insolvency Index from Experian, found that companies in the 100-500 employee bracket had performed well with the biggest fall in insolvencies during the period. It also found that the building and construction industry saw insolvency cases fall for the 11th consecutive month.

Max Firth, managing director, Experian Business Information Services, UK&I said: "The drop in larger company insolvencies is welcome news, and it is encouraging to see that some of the key drivers of the economy such as construction and financial services are performing well. By having a good handle on the financial position of both suppliers and customers, firms can keep on top of risks, as well as investing in growth areas where possible."

Expert Opinion

These insolvency figures are a reflection of very slow growth in the quarter and still mask the true extent of the economic problem due to ‘zombie’ companies continuing to survive in a benign interest rate environment. <br/> <br/>“Things could be changing however. The Government’s Help to Buy Scheme is continuing to fuel house prices and this could lead to the Bank of England raising underlying interest rates which may be too much for the zombies to bear and could lead to a significant rise in insolvencies.” <br/> Andrew Walker - Partner