Corporate insolvencies rise signals economic woe

Failing businesses up 1.8% in third quarter, with the worse still to come

Written by Paul Grant

Accountancy Age, 06 Nov 2007

Continued growth in the number of corporate insolvencies could threaten the UK economy as the credit crunch starts to hurt businesses.

Government statistics have revealed a 1.8% rise in the number of companies hitting the wall over the three months to September, with more companies expected to struggle in the coming months as the squeeze on credit hits hard.

Those in the travel, tourism and agriculture industries are likely to feel the full force of the changing market conditions.

Peter Sargent, council member of insolvency trade body R3 said that he had already noticed changes in the leisure and tourism industries and small businesses will be the first to suffer as credit becomes harder to obtain.

Grant Thornton has estimated that corporate insolvencies will rise by a further 5%-10% during the last three months of the year, with worse to come in 2008, according to the Financial Times, which could deal a huge blow to the UK economy.