Firms expect 10% jump in insolvencies

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
(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

Law firm creates credit crunch insolvency team

story in The Times

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