Liquidation rates are lowest since 1984 as UK economy continues to improve

In the 12 months to September, one in 186 active companies, or 0.54 per cent, went into liquidation in England and Wales, in a continuation of a downward trend that has been seen since 2011.

The Insolvency Service said: “The liquidation rate was at its lowest level since 1984, the earliest date it is possible to calculate the rate.”

Experts welcomed the business insolvency figures as another sign that the economy is “firmly in recovery mode” but they also warned that firms will face growing pains as economic improvement continues and the Bank of England base rate starts to climb from its 0.5 per cent low.

They said access to finance will be crucial for firms which are attempting to grow as the economy picks up.

Some 3,368 firms were liquidated between July and September, which is a 12 per cent fall compared with the same period a year ago and also the lowest quarterly total seen since spring 2008.

When a company enters liquidation, its assets are sold off and the proceeds are shared out among creditors. At the end of the process, the company is dissolved. The liquidation rate peaked in 1993 and picked up strongly again following the economic downturn in 2008/09.

William Ballmann, chairman of R3 in Yorkshire, which represents insolvency professionals, said: “The long-term corporate insolvency trend is downwards and activity has been very quiet recently.

“However, it is encouraging to see relatively greater use of business rescue procedures – rather than liquidations – in the last quarter following recent falls.

“Decreasing corporate insolvencies and sustained economic growth don’t always go hand-in-hand: counter-intuitively, growth can lead to rising insolvency levels.

“Businesses can run into trouble after recessions or economic doldrums – as we’ve experienced for the past five years or so – because they’re simply not ready for growth.”