Outlook gloomy, say insolvency experts
ACCOUNTANTS handling failed businesses expect the number of insolvencies to rise in the next few months.
The gloomy prediction comes from R3, the insolvency practitioners’ trade body, which asked a selection of its North West members for their views on future market trends.
Around 40, or 98%, agreed that case numbers would rise after the recession ends, in line with past experience.
They predict the number of corporate insolvencies throughout the UK will reach 26,675 in 2010, with March being the worst month, falling slightly to 26,275 in 2011. This compares with 21,811 in 2008 and 13,281 in the first half of this year.
Matt Dunham, North West regional chair of R3 and a partner at Grant Thornton, said: “Once the recession ends, there is a delay before businesses start to feel a sense of relief. This ‘insolvency lag’ is due to a number of reasons.
“Businesses may have been drawing on their reserves to survive and now find their resources are depleted. Lenders continue to be cautious. And once growth returns they creditors tend to act more aggressively.
He added: “2009 was a year of goodwill with the taxman offering ‘time to pay’ arrangements, suppliers extending credit terms and landlords being flexible on rent payments. As buyers come back to the market, it’s more tempting for creditors to try to liquidate their assets.
“Businesses need to be aware that the period just after a recession is dangerous time. Our advice is to look out for the warning signs and seek advice early when there is a better chance of rescue.”
