Feeds

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

Gov cuts, HMRC will push collapses late this year

  • alert
  • submit to reddit

Build a business case: developing custom apps

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." ®

Build a business case: developing custom apps

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Nintend-OH NO! Sorry, Mario – your profits are in another castle
Red-hatted mascot, red-colored logo, red-stained finance books
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
prev story

Whitepapers

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.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.