Businesses ‘should not expect insolvency rate to decline yet’

Posted 28/01/2010

Companies are unlikely to see their risk of facing insolvency decrease in the coming months despite the end of the recession, according to an expert.

Steven Law, vice president of insolvency body R3, has warned that the risk of business failure is likely to become higher than ever in spite of the economy growing by 0.1 per cent in the last quarter.

He told business website Startups that this is because tax amnesties from the government are to come to an end, while creditors are likely to become more proactive about recovering debts.

Mr Law therefore called on companies to ensure they take advice and keep on top of potential risks to their business, as recessions are typically followed by an increase in business failures.

“We can only base our thoughts on what’s happened historically and it always takes a little while for things to shake out in terms of insolvency numbers,” the expert said.

Research published by R3 earlier this week suggested that companies are equally pessimistic about insolvency risks in the coming months, with 61 per cent of businesses feeling the economic outlook for the first quarter of the year is not positive.