Domino Effect of UK Insolvencies

The hoped-for rally of the UK economy could ultimately turn into a domino rally of insolvencies, reports Reuters.

According to the newswire, the latter part of 2008 saw the number of firms which went bust increase at the fastest rate since 1991.

Insolvencies in the final quarter of the year were particularly high when assessed on a seasonally adjusted basis.

Reuters explains that the statistic for the fourth quarter of 2008 is the highest ever recorded under the current criteria.

The present means of seasonally adjusting company insolvencies was introduced in 1998, the newswire adds.

However, figures were also up on an annual basis, with 24 per cent more companies entering insolvency over the whole of 2008 when compared with the previous year.

The gross number was the greatest recorded since 1994 and stood at 15,535 for the full 12-month period.

In the last quarter alone 4,525 insolvencies were reported - a year-on-year increase of 54 per cent and the largest annual rise since 1991.

As of January 2009, new rules have come into force for administrators, The Insolvency Service notes.

This aims to provide creditors with a greater level of information about company finances when an organisation enters administration.