The economy, already weakened by the global downturn, suffered a further slowdown in the run-up to the war and put many businesses under pressure. And although most insolvency practitioners say it is too early to see businesses fail directly because of the war, evidence of war-related insolvencies is beginning to trickle in.
The most troubled companies are in the tourist and travel sectors, which have been suffering since September 11, but have seen a further drop in trade due to the war.
‘The travel industry has been suffering as a direct result of the war and the economic uncertainties in the period leading up to the start of the hostilities,’ said Maurice Moses, managing director of Numerica’s business recovery group.
‘Tour operators contract for flights and hotel stock. They are being forced to discount product heavily in order to stimulate demand and attract bookings,’ he added.
Brian Callaghan, head of business recovery at Chantrey Vellacott DFK, said he had seen ‘signs of the downturn kicking in both in terms of the practice and our client base’.
He added the current picture was poles apart from that of the 1990s.
‘What is so different,’ he said, ‘is interest rates are low, so companies don’t have masses to pay on their debts. But the war is doing nothing in terms of confidence in the economy.’
Martin Freeman of Griffins insolvency firm said that, although he had seen no particular increase in distressed companies due to the war, the firm was recruiting extra insolvency staff ‘because we expect there to be a downturn’.
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