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Thursday
Jul082010

How Many UK Companies are now on the Verge of Failure?

It is a fact of life that business insolvencies go up during and after a recession strikes.  As times get harder, those businesses with less of a cushion to see them through tough times find it impossible to carry on.

But I have also become aware of another problem which has reared its head in recent weeks, and will continue to do so for the foreseeable future as well.  This has been highlighted recently due to a statement made by those in charge at Begbies Traynor, a corporate insolvency specialist.

They have pointed out that many businesses do not go under during the recession itself, but in the weeks and months afterwards.  They described these businesses as ‘zombie’ businesses, and it is not hard to see the similarity.  The basic premise is that some businesses reach the point of no return during the recession itself, but continue on until after the recession has ended.

This occurs because some creditors believe – and rightly so – that they can get more for a business if it is sold once the economic situation begins to improve.  I know I would not consider buying a business during an economic downturn, but when things start to improve I may consider it.  You can see how this works, and why we can therefore expect to see more businesses struggling to succeed in the months to come.

I think this is a sad state of affairs, as it could well be that we have not seen anywhere near the last of the failed businesses just yet.  If you wish to get advice over the financial situation your own business is in, contact us here at St Matthew now.

 



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