As the latest insolvency figures reveal a harsh picture of trading conditions for the UK’s small businesses and self-employed, business owners are cautioned against using personal credit to help keep their business afloat.
According to the Insolvency Service, self-employed bankruptcies made up 18.9 per cent of all bankruptcies in quarter 4 2010 – a higher proportion than in recent quarters.
Businesses in the hospitality arena are experiencing the biggest difficulties with personal bankruptcies from business debts, up by 60 per cent, followed closely by wholesalers, retailers and property developers.
Atlantic Financial Management has seen a stark rise in the number of company directors and owners in serious financial problems, owing in part to the fact they have used their personal credit cards to support their business.
Kevin Still, director at Atlantic, said: “Whilst it is encouraging that the level of personal bankruptcies and IVAs are down, the real concern is the increase in failure rates of both small and medium sized companies and the knock on effect this will have.
James Falla, personal debt expert at beatmydebt.com agrees.
"Since the onset of the credit crunch, small business owners and directors have been forced to fund their businesses with personal debt and by borrowing from friends and family. As the number of small businesses which fail increases, more and more business owners will be unable to fund the debt they have taken on personally" Falla warned.
Wednesday 18 May 2011
Thursday 12 May 2011
Retail industry failures
The latest statistics from the Insolvency Service have shown a substantial rise in the number of retail administrations and retail company voluntary arrangements (CVAs) for the first quarter of 2011, compared with the last quarter of 2010. Administrations in retail have seen a 55% jump from 80 in the Q4 2010 to 124 in Q1 2011, while CVAs in retail have risen by 30% from 23 in Q4 2010 to 30 in Q1 2011. The overall number of administrations was up by nearly a quarter from 642 in Q4 2010 to 782 for Q1 22%.
Brian Green, restructuring partner at KPMG, commented:
“The figures show that the disparate negative economic indicators putting pressure on consumers are materialising in business failure. There is definitely a sense that the extended period of treading water, enabled by low interest rates, is coming to an end. The pain is not just being felt on the high street; the overall number of administrations went up by 22% in the first quarter of the year, compared with the last quarter of 2011. On a positive note, a discernible increase in corporate insolvency shows that lenders are starting to take definitive action on distressed situations, signalling the bottom of the market and the upturn which follows is on its way.
“The recession this time around has been different to those which have gone before in that the severe crash, typical of an economic downturn, has been avoided. While it has been shown that an economic fall can be cushioned, the underlying financial problems – such as too much debt and reduced demand - still need to be resolved and it now feels like we are reaching the end of the insolvency hiatus and activity is increasing.”
Do you agree or do you think retail insolvencies will increase even further?
Brian Green, restructuring partner at KPMG, commented:
“The figures show that the disparate negative economic indicators putting pressure on consumers are materialising in business failure. There is definitely a sense that the extended period of treading water, enabled by low interest rates, is coming to an end. The pain is not just being felt on the high street; the overall number of administrations went up by 22% in the first quarter of the year, compared with the last quarter of 2011. On a positive note, a discernible increase in corporate insolvency shows that lenders are starting to take definitive action on distressed situations, signalling the bottom of the market and the upturn which follows is on its way.
“The recession this time around has been different to those which have gone before in that the severe crash, typical of an economic downturn, has been avoided. While it has been shown that an economic fall can be cushioned, the underlying financial problems – such as too much debt and reduced demand - still need to be resolved and it now feels like we are reaching the end of the insolvency hiatus and activity is increasing.”
Do you agree or do you think retail insolvencies will increase even further?
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