The first three months of the year has seen an overall drop in the number of corporate insolvencies in the UK on both an annual and quarterly basis, according to PricewaterhouseCoopers, to suggest that trading conditions are continuing to improve.
The professional services firm recorded 3,657 business failures between 1 January and 31 March, a fall of 4.5% on Q4 2010 and 14% on the corresponding period last year.
The news is particularly encouraging considering January's 2.5p increase in VAT and the economy's unexpected contraction of 0.5% during the final three months of 2010, which could have proven the final straw for many businesses.
Yet many have found ways to survive and, with the latest Purchasing Managers' Indices from Markit/CIPS suggesting that both the construction and manufacturing industries expanded during Q1, things could at last be looking up for business owners nationwide.
It is ironic therefore that PwC reports that these two sectors accounted for the highest number of insolvencies in this period (614 and 452 respectively), followed closely by the retail sector (448), which was so heavily impacted by December's adverse weather. All three in fact saw quarterly rises in business failures, but improved on an annual basis.
The North East, East Midlands and Wales also recorded quarterly rises in corporate insolvencies (of 9.3%, 22% and 25% respectively), with Wales additionally seeing an annual increase of 29.5% - in line with Experian's most recent Insolvency Index.
However, it is hoped that this is a mere blip along the longer road to recovery, and Mike Jervis, partner in the business recovery services practice at PwC, urged owners not to rest on their laurels in order to stave off the threat of business failure:
"The improving picture in the UK of declining levels of corporate failure should not lead to complacency. The UK economy is by no means out of the woods yet as evidenced by the recent anaemic economic data and retailers' profit warnings. The impact of the Government's public sector spending cuts, which have yet to be felt, are likely to have a further adverse effect on consumer spending and especially on those companies supplying the public sector.
"The trend of falling corporate insolvency levels during the recent recession has been rather atypical but this is partly due to a combination of factors which have provided breathing space for many struggling businesses. Persistently low interest rates, increased time to pay agreements by HMRC, and a supportive attitude from secured lenders anxious to avoid the potential crystallisation of losses on their balance sheet, have all helped."