Worst 'yet to come' for insolvencies

Insolvency specialists Begbies Traynor have predicted that the economy has
mid point in a W=shaped recession and that unemployment and insolvency
statistics have yet to peak.

The remarks come as the firm releases its third quarter “Red Flag”
statistics which show that the number of companies with singificant and critical
financial problems has fallen in absolute terms both year on year and quarter on
quarter.

This, Begbies believes, reflects the impact of the taxman’s efforts to help
companies with their tax debts through the Business Payment Support Service
which has seen liabilities of almost £4bn deferred.

The firm now expects a “deluge” of business collapses in 2010 citing
statistics which show insolvencies peak between one and two years after GDP
stops shrinking.

Ric Traynor, executive chairman at Begbies, said the Red Flag stats showed
that the UK “may be in the eye of the storm”.

“There is every reason to suggest that the unemployment and insolvency peaks
of this recession remain some way off. experience of the last four recessions
tells us that unemployment levels and corporate and personal involvencies are
lagging indicators, and thus seem certain to rise in 2010.”

The Red Flag survey measures corporate distress signals using a number of
sources including court action, out of date accounts, County Court Judgements
and wind-up petitions.