The number of companies in administration rose 54% from 557 in the last quarter of 2007 to 858 at the close of the first quarter of 2008, according to research by magic circle law firm Freshfields Bruckhaus Deringer.
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Commenting on the findings, Freshfields restructuring and insolvency chief Ken Baird (pictured) said: “The credit crunch has caused a sharp reduction in the availability of credit and higher loan costs, factors which have drained much of the liquidity available within the market. This has triggered a marked downturn in fortunes across sectors with companies that were already under financial pressure being among the first to throw in the towel.”
He added: “The longer the credit crunch goes on, the harder it will be for many businesses to obtain new finance or renegotiate debt obligations. For some this may simply result in a temporary liquidity crisis which at worst could force their expansion plans to be put on ice; for others it will boil down to whether solvency and therefore long-term survival can be guaranteed.”
Freshfields was recently instructed on behalf of the Bank of England as it injected £50bn through a liquidity scheme aimed at jumpstarting the market.
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