PracticeConsultingBusiness Recovery – Insolvency surge predicted.

Business Recovery - Insolvency surge predicted.

The automotive industry, dotcoms and high street retailers are

Insolvency experts are bracing themselves for an increase in administrations and receiverships over the next 12 months as fears grow that an economic downturn could hit UK businesses.

Motor manufacturer suppliers, high street retailers and dotcoms all struggled in 2000 and are set to experience further business difficulties this year.

Last week Sir Edward George, governor of the Bank of the England, warned that a US recession is poised to hit the UK economy this year.

Sir Edward told the BBC. ‘The latest data suggests (the predicted slowdown in the US) may be sharper than we needed.’

Louise Brittan, insolvency partner at Baker Tilly, said: ‘The UK economy would seem to be walking towards recession conditions. The motor trade – from manufacturer suppliers to dealerships – is one area that could experience an increase in struggling businesses.’

The warning comes after a bad month for UK manufacturing with General Motors’ decision before Christmas to close its Vauxhall car plant in Luton, with the loss of about 2,500 jobs.

Ann Davies, head of KPMG Midlands restructuring, said: ‘Car manufacturer suppliers and dealerships are experiencing the sharp end of overcapacity across the automotive sector and there will be increased insolvencies this year.’

Figures from the trade and industry department for the third quarter of last year, published in November, recorded 3,776 company insolvencies in England and Wales, an increase of 8.6% on both the previous quarters.

Just 1% of companies became insolvent over the previous 12 months, according to the DTI figures.

Both high street retailers and business-to-consumer dotcoms are also set to experience increased failures through the year.

Lee Manning, turnaround partner at Kroll Buchler Phillips, said: ‘The e-tailing sector got its market research wrong – and over the next year will continue to contract.

‘Perhaps, the technology is not just good enough yet.’

‘High street retailers will also further business difficulties – with an overheated property market and rents going up and up.

– To view the latest DTI insolvency figures visit www.dti.gov.uk/sd/insolv/text.htm.

– For for an in depth analysis of the future of UK plc go to www.accountancyage.com/Business/1115984.

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