The Enterprise Act has led to a dramatic fall in the number of business failures in England and Wales, although personal bankruptcies have rocketed.
According to government figures published today there were 2,975 business failures in the third quarter of 2004, a decrease of 5.6% on the previous quarter and down 12% on the same period in 2003.
The figure made up of 1,136 compulsory liquidations, down 1.5% on the corresponding quarter last year, and 1,839 creditors voluntary liquidations, down 7.7% on the previous quarter and a decrease of 17.4% compared with 12 months ago.
Amendments to the Enterprise Act in 2002 opened up several new channels to administration, allowing companies to avoid outright liquidation and increasing their chances of being rescued.
It also contained new clauses for the owners of bankrupt businesses to start up again within 12 months, instead of three years previously.
Desmond Flynn, Insolvency Service inspector general, said: "It is encouraging to see that companies are continuing to use the administration process, which offers the prospect of rescue and a better deal for creditors, as a viable alternative to liquidation."
He added: "The number of companies entering administration has risen for the fifth successive quarter."
Meanwhile, the figures also show there were 11,967 individual insolvencies in England and Wales in the third quarter of 2004. It was an increase of 6.2% on the previous quarter and 31.1% on the same period a year ago.
Analaysts blamed rising interest rates for the spike in personal bankruptcies. The cost of borrowing climbed from 3.5% a year ago to 4.75% today.
