UK firms are preparing for a busy year of insolvencies in 2008, as they fear the credit crisis will deplete the cash reserves which normally would have saved troubled businesses going bankrupt.
Industry experts anticipate insolvencies will rise by as much as 10% as banks increasingly take a more conservative approach to lending and other investors such as private equity groups and hedge funds, which have saved troubled firms in the past and are now taking a more cautious view on risk.
The insolvency department at PricewaterhouseCoopers (PwC) is bracing for a busy new year, The Times reports. ‘We’re expecting a material increase in business,’ Mike Jervis, a partner at PwC’s London office, said. ‘If you gauge from the last economic downturn between 2001 and 2002, there could be a 10% increase in corporate insolvencies.’
Phillip Davidson, KPMG head of restructuring advisory, said normal trading conditions had been suspended for the last few years. ‘Companies have been kept alive artificially, but now they’ll be caught up,’ he told The Times.
Further reading:
Economic trends over past 20 years
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