Recovery firm warns of epidemic of insolvencies in 2009

by Gill Montia

Story link: Recovery firm warns of epidemic of insolvencies in 2009

Insolvency and restructuring specialist, Tenon Recovery, has reported a sharp rise in the number of businesses needing assistance.

The firm experienced a rise of almost 200% in the number of contacts from companies in the retail, restaurant, motor, property and leisure sectors, during November and December.

Among the difficulties faced is a fall in profit margins as companies compete for consumers’ cash and Tenon spokesman, Carl Jackson, warns that the symptoms being seeing now are a precursor to a potential epidemic of insolvencies in 2009.

Included in Tenon’s summary of the characteristics of a troubled business are: a weak equity base; low profit/losses; leveraged often due to a recent transaction; weak management; weak management information systems; dependence on one client/customer and fast growth causing overtrading.

Meanwhile, the Government is reported to be considering a range of new measures that could free up lending.

According to reports in the press, ministers are working on plans to provide guarantees for new lending, such as loans to small businesses, mortgages and car finance.

Details of a scheme that would charge banks a fee in return for the guarantee are expected shortly.