Economy figures spark fears of high administration numbers

Figures released by the Office for National Statistics (ONS) show that the UK economy fell by 0.5% between the months of April and June (Quarter 2). Though all may seem gloom, the good news is that the data is less than the original estimate of a 0.7% contraction published in July.

This slight increase from the projected estimate was due to a rise in output of the construction and production sectors, as they accounted for a 0.1% revision to the original July estimate.

Output from the construction sector fell by 3.9% in quarter 2 compared with the July forecast of a 5.2% drop from the previous quarter.

So things don’t look so bad, but the economy is still suffering from a double-dip recession. Though the construction and production output helped reduce the overall fall in GDP and with the Olympics promising an injection of funds due to ticket sales, the underlying truth is unchanged – the economy is in wrecks and there’s little hope of a quick recovery.

What the figures mean to UK companies

With the insolvency rate at about 0.09% and having peaked at 0.11% in March 2012, there are awes that the latest GDP figures released might bring about a higher number of companies sinking into administration as the UK is officially in its longest double-dip recession since the 1950’s.

GDP may be associated with corporate insolvencies, higher number of bankruptcy orders and debt relief orders. The economic downturn could create a domino effect where businesses delay payment for invoices and/or debt obligations due to delays or defaults by their creditors.

In a recession, unemployment figures tend to rise as companies battle to keep their budget afloat by sacrificing labour hours and this increases the likelihood for insolvency.

Global investor confidence is hampered as the FTSE 100 continues to hit lower daily lows and lower daily highs. This particularly affects firms reliant on external finance to stay afloat, hence forcing them into insolvency.

Business Recovery is here to help

At Business Recovery, we specialise in companies with financial difficulty to help find them the right financial solution when all hope seems to be lost.

We believe that company voluntary arrangements (CVAs), where firms avoid going into administration by asking creditors and lenders to renegotiate their debts. This is because we have established relationship with independent lenders and financiers in the marketplace who can provide support to businesses of all sizes, across a range of industries.

If your business is in any form of financial difficulty or cashflow problem or looking to invest in growth, then give us a call today on 01451 832533

About the Author

Mark Jefferson is a seasoned commercial finance professional with over 25 years’ experience in financial services, much of that spent providing funding to SMEs. Mark has worked with many other firms in a similar situation to yours. Call Mark on 01451 832533 and you can also follow him on Google+

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