Business insolvencies to surge from public sector cutbacks

Credit managers expect business insolvencies to leap by more than 10% within the next 12 months.

Nearly two thirds (64%) of credit professionals think business failure rates will rise by more than 10%, with 13% of those predicting failure rates to exceed 20%, according to research by commercial credit reference agency Graydon UK.

Martin Williams, managing director, Graydon UK, said: “Despite the prospect of a commercial insolvency boulder gathering momentum as it rolls down the economic hillside, the potential dangers have not yet been recognised by other operational areas.”

Even with the warning from credit professionals, just one third of companies are monitoring their clients’ exposure to the public sector.

Williams said: “Firms need to heed this warning now and ensure they are fully equipped to monitor exposure to public sector based revenues across the entire length of their supply chains. The failure of a key supplier or customer dependent upon government contracts could inflict huge damage to business stability at very short notice.”

He added that the taxman was clamping down on companies’ requests to defer their tax under the Time to Pay scheme. Because of this, there is a risk that other credit lines will shut.

Further reading:

Overpaid tax could run to £3bn

Read Martin Williams' Blog