Fewer firms go bust in London

LONDON appears finally to have shrugged off the financial woes of recent years with the number of firms in the capital going bust tumbling to a four-year low in the second quarter.

In an encouraging sign that the economic downturn has troughed, the number of London-based businesses entering insolvency in the three months to 30 June fell 11% to 616 - the lowest quarterly figure since spring 2000.

A total of 1304 London companies were declared insolvent in the first half, down 9% on last year, according to figures released today by PricewaterhouseCoopers.

'We are seeing fewer struggling businesses in the capital as the trading environment improves,î said David Hargrave, a partner in the Business Recovery Services practice at PwC.

'Those that are in distress are making full use of a vibrant private equity market and the new business rescue legislation. As a result they are being successfully restructured.'

The Enterprise Act was introduced in Britain in September last year to give company management greater flexibility to restructure their business.

It places greater weight on finding a solution that serves the interests of all creditors, and if appropriate, on re-establishing the insolvent company as a going concern.

Hargrave said use of administrations, usually a company-led process, surged 159% in London in the three months to 30 June compared with the same period last year.

That appears to have been at the expense of less rescue-oriented receiverships, which fell by 42% in the same period.

London has benefited from the return of tourists and a relative boom in the City as share prices have risen and some takeover activity restarted.

That in turn has seen the resurgence of City bonuses, which has underpinned house prices at the top of the range.

The news on insolvencies backs up a recent survey which showed that London firms are now more confident about their prospects than companies in the rest of the country.

A poll of 2000 firms by Lloyds TSB showed that London had surged from the bottom of Britain's feelgood league table to the top over the past six months. The capital's firms all reported better sales, order books and profit margins with almost a third planning to take on extra staff.

But a contrasting survey by Royal Bank of Scotland last month claimed the gloss was about to come off London, with a distinct easing in consumer demand for goods and services compared with the rest of Britain.