Insolvency firm hit as failure rate improves

ONE of the UK's largest insolvency specialists issued a profits warning yesterday because fewer companies are going bust as the economy improves.

Shares in Aim-listed Begbies Traynor dropped 7 per cent after it warned that adjusted pre-tax profits for the six months to 31 October were expected to be 16 per cent lower year-on-year, down 700,000 to 3.6 million.

The company was hit by a 9 per cent fall in insolvency revenues as the economic recovery saw fewer firms go under, while Begbies also took 800,000 in restructuring costs.

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Official statistics recently showed the number of insolvencies in the third quarter was 18 per cent lower year-on-year.

Begbies, which claims to be the UK's biggest administrator by cases handled, said the number of companies falling into administration remained lower than expected in the fourth quarter of the year because of temporary UK government support initiatives and the lenience of creditors.

However, it expects more insolvencies in 2011 as the Westminster government's Budget cuts start to bite.

The group had previously benefited from the recession as the number of companies falling into administration soared.

Its adjusted pre-tax profits increased 40 per cent to 9.8m in the year to April 2009, as the number of companies it dealt with as administrator increased by 38 per cent to 1,800.