UK business failures could reach fresh record in next year
London, UK (09/10/2009)
At least 30,000 companies will have fallen into liquidation, receivership or administration by the end of the year, according to Nick Hood, a partner at Begbies Traynor, who said that the “deeply worrying” levels would not return to previous norms until 2013.
Debt-laden companies are struggling to stay within banking covenants as the recession squeezes revenues and margins.
“There’s going to be a real shortage of emergency funding for companies that get into trouble,” said Mr Hood.
“The hatches are very firmly battened down. People are being very cautious about investing, about making commitments.”
Retailers – particularly those in the mid-market – are facing the toughest Christmas on the high street in two generations, Mr Hood said.
Last month alone, 125 companies in the sector encountered “critical financial problems”, according to Begbies Traynor, up 37 per cent from August.
“I wonder whether retailers that survived last Christmas can really afford another season of discounting,” said Mr Hood.
Recent rescue packages include camera chain Jessops, whose shareholders saw their equity shrink to £100,000 under a debt-for-equity swap with HSBC. Blacks Leisure is expected to contact landlords in the coming weeks with a view to agreeing a com-pany voluntary agreement.
As a lagging economic indicator, business failures do not typically peak until a year or two after the end of a recession, Mr Hood said.
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