Worst is yet to come for insolvencies

| October 20, 2009 | 0 Comments

Recovery and restructuring company, Begbies Traynor, is forecasting a difficult time for businesses next year.

Its report titled ‘Red Flag Alert’ is a monitor of early warning signs of company distress and its latest report reveals that during the July to September 2009 period, 134,000 businesses still showed “material signs of distress” with the engineering and recruitment sectors being the “most impacted by adverse actions” in the quarter.

Begbies Traynor said that the UK is in the midst of a double-dip recession and the recession of the 1980s saw a brief rise in business confidence before deteriorating again in 1982.

The news comes despite the number of businesses failing in the third quarter falling by 14% to 149,543 compared with the same period a year earlier.

Ric Traynor, executive chairman of Begbies Traynor, comments: “The third quarter Red Flag Alert statistics demonstrate that the UK may be in the eye of the storm. The well-intentioned Government efforts to prop up struggling companies may provide a necessary lifeline in the short-term, but will ultimately prove futile in many cases.

“Both banks and trade creditors are also holding off wherever possible in the hope that business fortunes may improve, but Begbies Traynor supports the view of many leading economists that the UK is currently at the midpoint of a ‘W’ shaped recession.

“Experience of the last four recessions tells us that unemployment levels and corporate and personal insolvencies are lagging indicators, and thus seem certain to rise in 2010,” concluded Mr Traynor.

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