Fall in number of failing firms in 2010

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Deloitte report shows marked decline in companies being liquidated.

Business advisory service Deloitte has offered troubled businesses some cheering news – last year was actually not as bad for businesses as some have made out.

Deloitte’s Administration Rate Survey has shown that the number of companies which went into administration in 2010 fell by 35% against 2009.

A total of 2,086 companies filed for administration last year, compared to 3,188 in 2009. In addition, the research shows that in the fourth quarter of 2010 there was a 6% fall on the previous quarter – 438 companies in Q4 compared to 467 in Q3.

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The retail sector, in particular, showed encouraging signs of a return to health, with a 43% decline in administrations – 165 compared to 290 in 2009. The Deloitte report shows that the brunt of the economic downturn was borne by the property and construction sectors, which saw 453 firms failing in 2010 – still a 34% fall on 2009.

However, Lee Manning, reorganisation services partner at Deloitte, issued a word of warning on the figures. He said: ““Whilst 2010 administration statistics may have improved, the reality is that many companies are still walking a tight rope. A large number of struggling companies were able to stay afloat because of low interest rates, a lenient approach by lenders and HMRC’s favourable Time to Pay scheme. However, the rapidly changing economic environment will no longer make this sustainable.

“Whilst these figures will no doubt bring a glimmer of hope to the retail sector, we will undoubtedly see a growing number of retailers struggle to cope in the first few months of 2011 as they buckle under the pressure of government spending cuts and the increase in VAT which will see consumers cut back on spending in an attempt to make ends meet.”

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