Firms Go Bust At Fastest Rate Since 1991
David Milliken
LONDON (Reuters) - Companies in England and Wales went bust at the fastest rate since 1991 late last year as Britain plunged into recession, and experts predict a domino effect of business failures for 2009.
Shoppers walk past a Woolworths store in west London December 17, 2008.
Some 4,525 businesses hit the wall in the last three months of 2008, 54 percent more than last year and the biggest annual jump since April-June 1991, when the nation suffered its last recession, non-seasonally adjusted government figures showed on Friday.
A total of 15,535 companies went insolvent in 2008 as a whole, 24 percent more than 2007 and the highest number since 1994.
Personal insolvencies hit a two-year high of 29,444 on a seasonally adjusted basis, 8 percent up on the previous quarter and 18 percent more than a year earlier.
"It will only get worse," said Scott Pinfield, managing director of restructuring company Alvarez & Marsal.
"A company can go from apparent health to breaking point in a matter of weeks. With very few exceptions, no sector will escape the effects of this downturn."
The rising number of company insolvencies is likely to have a chain effect over coming months, by bringing down suppliers who are owed money, Pinfield said.
"Banks are much more cautious now about what they lend and to whom than they ever were in past recessions. Suppliers are dangerously exposed to customer defaults, and retailers have been left high and dry without sufficient stock to sell."
The seasonally adjusted quarterly data for companies show the highest number of insolvencies since that particular series began in 1998.
Meanwhile the housing market is likely to face further pressure as banks repossess debtors' homes.
"The more that house prices fall, the more people will be trapped with negative equity. And it is those people with the weakest credit ratings that are being hardest hit by tighter lending conditions and more punitive terms," said Howard Archer, economist at IHS Global Insight.
The economic slowdown and the contraction in credit mean many companies are caught between a rock and a hard place, said Ken Baird, head of restructuring at law firm Freshfields Bruckhaus Deringer.
"The next four to six months are likely to indicate how deep the effects of the recession will actually be and in all likelihood confirm that the worst is not over yet," he said.
(Additional reporting by Sumeet Desai; editing by Ron Askew)
uk.reuters.com/article/businessNews/idUKTRE51528120090206