The pattern of the current recession seems likely to follow the ‘double dip’ W-shaped pattern, according to an analysis of insolvency figures by Leeds University Business School’s Credit Management Research Centre (CMRC).

The Centre’s latest projections suggest that around 35,000 companies will enter administration, liquidation or receivership during 2009 (up from 28,000 in 2008) and that this relatively high level of failure will continue into 2010, when the country will witness a further 32,000 insolvencies.

Since company insolvencies translate into unemployment, the now rapid rise in unemployment in a stagnant economy puts further pressure on indebted and financially stressed households and further strain on the banks. This will potentially incubate another crisis in the economy by the late autumn, hence the double dip.

The forecasting model tracks monthly trends by sector and region in company insolvencies and company defaults on debt payments. An analysis by sector shows the construction sector continues to be hit particularly hard, with a 17% increase in insolvencies (from 2,122 to 2,487) in the first 6 months of 2009, compared to the last 6 months of 2008. Forecasts for the sector make grim reading, with the rate of insolvencies expected to increase through 2009 and 2010.

The pattern across all sectors varies by region, with Outer London and Northern Ireland having witnessed some of the sharpest rises the first half of 2009, while insolvencies fell in Scotland, Wales, Central London and the South of England compared to the previous 6 months.

For the time being at least, household debt, and spiralling government debt, continue to put a drag on the prospects of recovery and the Centre’s Professor Nick Wilson is sanguine about the country’s prospects in the short term. “It is difficult to envisage how a recovery will emanate from Britain’s debt-bloated economy. It won’t come from consumer spending, nor from a housing boom. It might come from Britain’s culture of creativity, innovation, technology and enterprise if the banking sector can move away from gambling and back into making sound investments in companies.”