Credit squeeze boosts firms' liquidations

By Christina Fincher

LONDON (Reuters) - The number of companies going bust jumped sharply in the second quarter as the credit squeeze tightened its grip, government figures showed on Friday.

The Insolvency Service said 3,560 companies went into liquidation between April and June. This was an increase of 11.6 percent on the first quarter and an increase of 15.0 percent on the same period a year ago.

While the actual number of insolvencies is only around half that reached in the recession of the early 1990s, a steep rise in the number of firms in administration suggested more pain to come.

More than 1,500 companies were placed in administration in the first half of this year, 42 percent more than in the same period a year ago.

"Unfortunately, this feels like just the beginning," Nick Wood, Recovery and Reorganisation Partner with Grant Thornton,

"The negative sentiment expressed in a huge range of economic indicators is now feeding through to the real economy, with businesses that a year ago had been able to paper over the cracks now being fully exposed."

Separate data showed corporate insolvencies in Scotland and Northern Ireland were some 30 percent higher in the second quarter than the first, although these figures are not seasonally adjusted.

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