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Corporate insolvencies: the worst still to come

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“Government figures out on Friday will show an approximate 18 per cent decrease in corporate insolvencies,” predicts Carl Jackson, head of recovery at the insolvency and turnaround specialists RSM Tenon. “But that still means that one business went bust every 30 minutes last year.”

And the situation is set to get worse. Looking forward, Jackson says 2011 will be a “difficult year” for businesses across the UK and that fears of a double-dip recession now have to be taken very seriously.

“There are a lot of businesses on a knife edge and, with pressure mounting on the Bank of England’s Monetary Policy Committee to increase interest rates, even a 0.5 per cent rise could result in an increase in business failures,” he adds.

Sectors that rely on discretionary spend, such as hospitality and tourism and retail, will continue to struggle following the rise in VAT and increasing inflation.

“Some banks are compounding the situation further as they are becoming increasingly impatient with failing businesses,” says Jackson. “Many turnaround plans set out over a year ago are taking longer than expected for any improvements to be seen. Therefore, some lenders are now willing to cut their losses and accept the bad debt instead of continuing to drip feed businesses that show no progress.

“Next year, we’ll see the highest levels of personal insolvency on record, rising to approximately 140,000 people, enough to fill both the London 2012 Olympic stadium and the Emirates stadium combined.”

And if that’s not enough to sink you into depression, Jackon also predicts that UK unemployment will rise to three million – last seen in 1993.

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