Corporate insolvencies could rise 10% says Begbies Traynor

UK COMPANY COLLAPSES could rise 10% according to a fourth-quarter Begbies Traynor Red Flag report on distressed businesses

The latest figures for the last quarter of 2010 show a 20% increase on the previous quarter and a 4% increase on the same period last year.

According to the report there are almost 148,000 companies facing “significant” or critical financial difficulty. It is also estimated those distressed companies owe a combined total of about £53bn to creditors.

Ric Traynor, executive chairman of Begbies Traynor, said many of these businesses would likely reach informal arrangements with creditors to repay their debt.

However, he expects to see a 10% rise in corporate insolvencies this year compared to last year.

“Given historical experience, these higher levels of distress would typically be expected to translate into a 10% or greater rise in formal insolvencies in 2011 (compared to an estimated 15% decline in 2010), due to hardening creditor attitudes, the impact of public sector cuts and the gradual unwinding of government support measures. This could mean a rise from circa 21,500 insolvencies in 2010 to more than 23,500 in 2011.”

The Red Flag report monitors the numbers of companies that have either a court action and/or poor, very poor, insolvent or out of date accounts. It also looks at those with County Court judgments totalling £5,000 or more and/or winding-up petitions.


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