Corporate insolvencies look set to rise by over 1,000 cases next year with nearly a million businesses suffering decreased profits and other forms of financial distress, according to the Association of Business Recovery Professionals
Inland Revenue (HMRC) was responsible for 58 per cent of all the petitions submitted over the last year to wind-up companies compared to just 43 per cent in the previous year. Petitioning to wind-up a company is the “nuclear” option used by creditors who hope to get paid back some of the money they are owed by having a businesses’ assets liquidated and sold off.
In addition, the average financial strength score for businesses increased, on Experian’s scale, from 80.79 in August 2009 to 81.06 in August 2010. The biggest increase in financial strength came from the smallest businesses (with one to two employees) this is a fantastic boost for small business – from 81.32 in August 2009 to 82.22 in August 2010.
In its impact assessment of the changes, the Government admits that the cost to business, charities or voluntary bodies of moving 21-year-olds to the adult rate will be about £48.2 million
These figures come after those published last week by the British Bankers’ Association, which revealed that traditional bank lending to small businesses in May 2010 fell by more than £100m compared with the same period in 2009.
However, Scotland saw a modest rise in payment times beyond agreed terms, from 23.38 days in the second quarter of 2009 to 23.65 days for the same period this year, while late payments in the North West averaged 25.16 days to overtake London as the slowest paying region.
Balancing the books is a good thing for every business, and the Government is no different in this regard, but let us hope that the Chancellor has recognised the ripple effect that will ensue from public expenditure cutbacks, and the savings more than offset the costs to the country of business failures and consequent job losses’ impact upon the Benefits budget.
The Insolvency Service has swung the axe on 50 front line official receiver investigators in a move which is “tantamount to legalising corporate theft”, according to sources.
The construction industry continues to be one of the worst affected sectors, with 555 UK businesses being declared insolvent during the second quarter. Manufacturing was the next worst hit with 421, with the retail sector in third with 342 businesses insolvent.
