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Figures released by PricewaterhouseCoopers show that they rose 17 per cent compared to the same period of last year.

In total, 3,359 businesses across England and Wales entered into insolvency in January, February and March – the highest number of insolvencies since the fall-out from the dot-com crash in 2003.

Inadequate planning 

Mike Jervis, partner in the business recovery services practice at PricewaterhouseCoopers, said that the increase in the number of insolvencies this quarter is clearly a result of the current economic climate, but added that in his experience most company failure and insolvency is down to inadequate planning to deal with these more challenging conditions.

His message to businesses is not to panic, but to ensure they are doing all they can to manage their way through the potential downturn as soon as they see signs of financial distress.

The four key areas to focus on are: reviewing their business strategy so they can be certain it is still relevant, making sure they have access to adequate finance and cash, looking at their operational capability to ensure it is correctly deployed around the profit making areas of the business, and finally managing and communicating with their stakeholders from staff to banks and suppliers.

“History has shown that the companies who emerge from the downturn as sector leaders will be those who proactively undertake a strategic, financial and operational review now, while carefully and positively managing their stakeholders differing agendas,” Jervis said.

Constantly review store portfolios 

The rise in insolvencies is being driven by the retail and construction sectors, which are also seeing five year highs this quarter with 431 and 500 insolvencies respectively.

Jervis pointed out that the recent problems suffered by the retail sector had been well documented and were further impacted by the squeeze on consumer’s discretionary spend.

“Our experience shows, however, that when retailers get into distress they shed nearly 40 per cent of their store portfolio. Retailers need to constantly review their store portfolios to recognise those stores that are loss making and deal with them appropriately to ensure they have a higher prospect of survival,” he concluded.

Related articles

• First quarter sees leap in failures
• Report reveals tough year ahead for UK organisations
• UK corporate insolvencies forecast to rise by 3%
• Business failures set to reach five year high

Related links 

• PricewaterhouseCoopers
• PwC - Managing in a downturn