By Max Clarke

After an unexpected surge in the manufacturing sector, there is more good news for the UK economy after a survey revealed a drop in the number of company failures.

The number of company failures is expected to be down 1.5% on the period April — June, according to the Graydon Insolvency Predictor- defying forecasts of a rise.

Based on data published today by the commercial credit referencing agency Graydon UK, the number of corporate insolvencies will be 4.5 per cent lower than the number recorded during the third quarter of 2010.

“The long-predicted rise in company insolvencies is still failing to materialise despite the severe stress the global economy has come under over the summer,” commented Gordon Skaljak, External Spokesperson, Graydon UK. “While the number of firms entering insolvency rose during the first half of the year we are now seeing a decline in the number of business failures.”

“Certain sectors will have seen a significant increase in corporate insolvencies during the third quarter however. One area where insolvencies are picking up pace considerably is the real estate sector with the number of company failures expected to double those recorded during Q2. After a prolonged downturn we are seeing more and more real estate businesses collapsing under the weight of their debts.”

The Graydon Insolvency Predictor has found that insolvencies within the hospitality sector are rising also. According to Graydon UK’s data, 25 per cent more hotels will fail in the third quarter in comparison to Q2 in the wake of the summer holidays.

Gordon Skaljak added: “Discretionary spending is coming under further pressure as the cost of living rises and consumers become increasingly fearful of another recession. A number of reports have underlined the extent to which the high street is being affected, with research from the Confederation of British Industry suggesting that retail sales weakened at their fastest pace in 16 months during September. Surprisingly, retail insolvencies are expected to be flat in the third quarter with volumes well within seasonal norms, as struggling retailers attempt to make it through the crucial trading period leading to Christmas. Quarterly rents due on 1 October are expected to tip a number of retailers over the edge and into insolvency however.”

“Companies need to be especially vigilant in monitoring the risks of doing business, both with current and new customers and suppliers. They should also assess carefully their supply chains and customer base to determine their exposure to high risk sectors in order to lessen the potentially devastating impact cause by the non-payment of invoices.”

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