Feeds

Company collapses? We've only just begun, warn accountants

Gov cuts, HMRC will push collapses late this year

  • alert
  • submit to reddit

Boost IT visibility and business value

An insolvency firm has warned that company collapses could shoot up later this year, as HMRC begins to take a firmer line on payments and long-awaited spending cuts start to hurt public sector suppliers.

Begbies Traynor, which produces the Red Flag Alert, said that 140,000 companies experienced "Significant and Critical financial problems" in the fourth quarter. This was up 6 per cent on the previous quarter, but 14 per cent down on the same period in 2008.

It said this suggested "high levels of corporate distress", despite government efforts to stimulate the economy. It added that it was seeing business failures occur at "an earlier stage of deterioration" than in previous downturns.

More positive factors included a more lenient approach by creditors, particularly compared to the panic in the last quarter of 2008, and improved business confidence.

However, it warned that HMRC is still one of the main creditors in many insolvencies, and once the "time-to-pay" scheme ends, "there will be a significant rise in company failures – most probably from Q3 2010 onwards."

It added that companies with a big dependence on the public sector were "particularly vulnerable" after the election, when public spending cuts begin in earnest.

This will be further exacerbated by tax and interest rate rises, as well as increasing pressure on consumer spending.

According to executive chairman Rick Traynor, unemployment and corporate collapses have historically lagged behind "technical recessions" by one to two years.

So, he said, "there is every reason to suggest that the insolvency peaks of this recession remain some way off." ®

The essential guide to IT transformation

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
Banking apps: Handy, can grab all your money... and RIDDLED with coding flaws
Yep, that one place you'd hoped you wouldn't find 'em
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
Broadband slow and expensive? Blame Telstra says CloudFlare
Won't peer, will gouge for Internet transit
Netflix swallows yet another bitter pill, inks peering deal with TWC
Net neutrality crusader once again pays up for priority access
prev story

Whitepapers

Best practices for enterprise data
Discussing how technology providers have innovated in order to solve new challenges, creating a new framework for enterprise data.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?