More company failures on the horizon
COMPANY failures are set to increase in the coming months, according to a North West insolvency expert.
Paul Reeves, a director in Manchester with restructuring firm Leonard Curtis, believes we have yet to see a true reflection of the impact of the worst recession in 70 years.
He said: “I can’t see where the turmoil is going to end. I believe we’ve seen the worse of the bad news, but feel there’s a latent issue, because a lot of struggling businesses, which have been kept afloat by a softer stance from creditors, are still likely to fail.
He said the months of leniency afforded to stressed businesses by Time to Pay initiatives from HM Revenue were “probably coming to an end”.
“I think the Crown has been more lenient – with the Government saying ‘we need to do our bit’, but this has been like giving some businesses the rope to hang themselves and I think the Crown is now beginning to show its teeth.”
He said with public finances stretched, there was now pressure to get monies owed to the state into the coffers, with the inevitable consequence of more failures.
“Those businesses which have been hanging on are going to fail, we are going to have a very busy period, in fact the insolvency market started to pick up after the school holidays really.”
Mr Reeves, pictured, who recently handled the administration of Stockport County FC, said any business owing money to the Crown was likely to struggle in the coming months.
“The Crown is being a lot more stringent now in what it will allow businesses to do in terms of deferred payment,” he said.
As with previous downturns, he expects there to be more restructuring work “coming out of it than going in.”
He explained: “In the middle of a recession – and with this one in particular because it’s been so deep – people have not had the ability to raise money to do anything.
“As we come out of it people with cash start looking at opportunities and you begin to see things happening.”
Mr Reeves said he believes controversial pre-pack administrations have a role to play, particularly in the owner-managed business sector.
“I do think pre-packs have a role to play. Some deals do make you draw breath, but I do think it’s an effective tool for saving jobs and helping protect creditors of some owner-managed businesses.”
