Decreased profits ‘could cause more business insolvency in 2011’

Posted 06/12/2010

It has been predicted that more businesses could fall victim to insolvency during 2011 as a result of decreased profits.

Trade body R3 said in its Business Distress Index that almost 50 per cent of companies which responded to a survey are having problems due to their outgoings costing more than their incoming finances at present.

R3 president Steven Law said insolvency practitioners across the UK expect business failures to increase to 27,500 in 2011, up from 26,400 in 2009.

“Although corporate insolvency numbers have decreased over 2010, experience of past recessions tells us to expect them to continue rising as the recession finishes in an insolvency lag,” he added.

However, the survey found that only three per cent of firms think it is at all likely they will go insolvent next year.

In October 2010, R3 said it had found that ten per cent of small companies fear they would be vulnerable if they lost supply contracts with the public sector.