Record company failures forecast for 2010

by Gill Montia

Story link: Record company failures forecast for 2010

Grant Thornton has warned “there is no light at the end of the tunnel for troubled companies that are relying on a fast economic recovery to help them repair their balance sheets”.

The accountancy and recovery specialist is predicting record company administrations in England and Wales in 2010, following on from a 2009 total of 4,161, up 1.7% on 2008.

Whilst acknowledging that the UK is technically out of recession, the firm point out that growth is minimal, meaning the risk of a double dip recession remains real despite a drop in the number of business failures in the final quarter of 2009.

Grant Thornton Recovery and Reorganisation partner, Malcolm Shierson, comments: “While this is good news, the number continues to be near an historic high and we expect the number of liquidations to shoot up even further when the future government stops extending the ‘Time to Pay’ tax scheme.”

He adds: “There is as yet, little sign of liquidity returning to the banking sector, and that will be key to any return to normality.”

Last month, Begbies Traynor warned that over 140,000 UK companies experienced “Significant and Critical” financial problems in the final quarter of 2009.

In addition, the recovery and restructuring specialist identified a new trend whereby business failures are occurring at an earlier stage of deterioration than in previous recessions.

The firm has also predicted a significant rise in company failures in the year ahead (most probably from Q3 2010 onwards), taking into account the ending of HM Revenue & Customs’ “Time to Pay” scheme.