The UK recorded a dramatic fall in business failures in January following the introduction of the new Voluntary Arrangement moratorium procedures which came into force on 1 January 2003.

According to the latest insolvency figures released by global business solutions company Experian, in the first month of 2003, the number of business failures fell by 12.8% compared to the same period last year. The toll of 1,053 failures for January was 155 fewer than in January 2002 and 472 fewer than in December 2002. However, this is still 67 more failures than were recorded in January 2001, indicating that the overall trend remains upwards.

During January 2003 there was a major reduction in the number of receiverships and administration orders, which decreased by 69.4% and 31.6% respectively. However, compulsory liquidations increased by 1% to 289 making up over 27% of company failures, compared with just 20% two years ago.

While the number of companies failing during January in Northern Ireland was unchanged from that of the same period in 2003, this represented a decline from December 2002 when 11 companies closed. The monthly insolvency index from Experian recorded regional decreases right across the UK, except in the South East, where there was an increase of 14% in insolvencies on the same period in 2002, East Anglia (up 11%) and the North East, where insolvencies rose from eight in January 2002 to 28 in January 2003.

However, the January 2002 total in the North East was abnormally low: the average for the remaining 11 months of 2002 was 25 per month, indicating that the upward trend in the region has continued into 2003.

The new Company Voluntary Arrangement moratorium came into force on 1 January 2003. The moratorium gives small firms in difficulty a short respite from legal action while a rescue proposal is put to creditors, enabling them to reach a legally binding agreement with their creditors in satisfaction of their debts. Previously, any creditor could take legal action against the assets of the company and so jeopardise the prospects of a voluntary arrangement succeeding.

(SP)