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Individuals and businesses are facing the scenario of going bust on an unprecedented scale. Bankruptcy UK filings are expected to break all records for 2009, putting more than 35,000 businesses out of trading. Some quick number crunching shows that this equates to around 95 firms going under every day.
If bankruptcies in the UK do play out as expected, 35,000 bust businesses will top the 1990s recession figures by 18%.
Individual cases of bankruptcy UK are also alarming, with up to 125,000 people forecasted to go bust by 2010, according to Begbies Traynor the insolvency and restructuring group. This figure represents 342 people a day becoming insolvent.
The publicity surrounding the declaration of bankruptcy is one of the many consequences of being made bankrupt. The London Gazette publishes all cases of liquidation, both individual and corporate. Richard Goodwin, editor at the London Gazette has commented on the increasing bankruptcy UK trend.
“The Gazette’s pagination was a record in March – averaging 96 pages per day. This was significantly higher than the 85 average for last year or 78 for 2007.”
Nick Hood at Begbies Traynor warned that the rate is accelerating, saying “on a bad day we are seeing 20 firms go bust daily” and that seems to be affecting businesses that were relatively safe in the last recession.
“It feels much worse than the 1990s – there are much fewer options to rescue businesses today. In the past you could go to another bank or small-business owners could remortgage and use equity from their homes – today that is next to impossible,” commented Mr Hood.
Seven years ago the government introduced the 2002 Enterprise Act, which was widely criticised for its liberal stance on credit. In effect, it helped create the misconception that incurring vast amounts of credit had limited risk potential.
Accountancy firm Ernst & Young, has revealed that quoted companies in Britain issued 117 profit warnings in the first quarter with worse to come. The first quarter warning was the highest since 2000 and marked the third three-month period of more than 100 warnings. All of which adds more grey to an already darkening picture.
Prospects look extremely uncertain for the rest of the year with scores of businesses bordering on filing bankruptcy UK. The industries giving the most amount of warnings for the first quarter of the year were support services, industrial engineering, media and software development. Unsurprisingly, financial services are also in grave danger.
There is no doubt that this recession is effecting a range of businesses right across the board.
A leading consultancy group has predicted more than 600,000 job losses as companies aim to restructure. A survey of the top 140 out of 1,000 firms, revealed “unprecedented” cost-cutting which will have a long-term detrimental effect on the economy.
For instance, 90% of companies plan operational cuts in 2009-10, with a high proportion planning job cuts. Regrettably, around 50% of large companies intent to reduce staff by an average of 10% this year.
Return to Debt Advice UK homepage, or click IVA UK for information on an alternative to bankruptcy.
