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Herald View

ANY rise in corporate insolvencies is unwelcome.

And news yesterday of a 70.6% year-on-year leap in the number of corporate insolvencies in the opening quarter of 2014 was a big as well as an unpleasant surprise, even taking into account the historical pattern of company failures rising as the economy recovers from recession.

Experts attributed the leap in the number of insolvencies, to 244 in the January to March quarter, partly to the emergence of more potential buyers of assets of distressed companies, as businesses with access to funds start investing again amid better economic conditions.

This improvement in the market for distressed assets can provide a more lucrative exit for banks and other creditors than would have been the case in the depths of recession.

And the insolvency numbers could climb higher from here.

There is a view that banks may be holding off from taking action against companies which have alleged they were mis-sold complex interest-rate-hedging products. And there is a belief that taxpayer-backed banks might act more on purely commercial and less on public interest grounds when returned fully to the private sector. It remains to be seen whether or not this transpires.

The view that higher corporate insolvency numbers might be a sign things are getting better may come as something of a relief in the context of yesterday's grim figures from the Accountant in Bankruptcy.

But it will be of little or no comfort to those businesses which are now having the plug pulled by banks or other creditors, often after a long struggle.

Contextual targeting label: 
Business

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