Press Releases
16 February 2009
Latest Insolvency Service figures indicate higher lending margins are sending small businesses to the wall
- Tougher lending criteria pushing businesses into insolvency
- Credit crunch is tightening its grip
The latest figures published by The Insolvency Service reveal that the number of individual insolvencies in England and Wales has risen by 18.5% in the past year to reach 29,444 in the fourth quarter of 2008. Wilkins Kennedy, the Top 25 accountancy firm says that rather than victims of the recession the personal insolvencies we are seeing now are more likely to be those who built up unsustainable levels of debt prior to the credit crunch.
Corporate insolvencies have soared by 51.6% in the past year to reach 4,607 in the last quarter.
Comments from Keith Stevens, Insolvency Partner, Top 25 accountants Wilkins Kennedy Tel: 01784 435561
“Small businesses are being driven to the wall by higher borrowing margins. There is a tendency to link more corporate loans to Libor rather than the interest rate set by the Bank of England.”
“That is hitting businesses with turnovers of less than £5 million hardest. For companies without assets to borrow on, the situation is tougher still.”
“Lenders are shying away from even secured lending to small businesses and raising interest rates as the downturn makes these kinds of loans look increasingly risky. Banks are requiring even those with strong business plans to provide a high level of security against loans. At the same time it is becoming increasingly difficult for company directors to borrow against assets that are continuing to fall in value.”
“Despite calls from the Government there is no sign that the freeze on lending to businesses is beginning to thaw.”
“In the current climate businesses need to be looking to secure new
credit lines now, well before their existing loan facilities expire, as
this will improve their chances of guaranteeing their funding.”
“On the other hand weaker businesses that have survived by taking on high levels of debt are now finding that the rug has been pulled out from under them as lenders refuse to continue funding them at sensible interest rates.”
“Construction and property businesses have been hit the hardest but we are now seeing increasing numbers of pubs, bars and clubs going to the wall as they struggle against the downturn in consumer spending.”
Another surge in personal insolvencies expected as downturn continues
“Whilst the impact of the credit crunch is now sending increasing numbers of businesses to the wall we are only now beginning to see large scale job cuts and this will see the figures for personal insolvencies rise much higher in the months ahead.”
“The severity of the UK’s debt binge was already in evidence before the credit crunch, with individual insolvencies rising sharply in the past few years and even now there is still likely to be a glut of people who have taken on unmanageable debts and are still trying to put off the inevitable.”
“Things are going to get even tougher for those struggling to pay back unsecured loans. Unemployment has almost reached the two million mark so if you have outstanding debts and have been unable to build up adequate savings then there will be nothing to cushion the blow.”
“The reality is that even as the economy recovers we are unlikely to see a fall in the number of individual insolvencies for a very long time.”
ENDS
Press enquiries:
Keith Stevens
Wilkins Kennedy
Tel: 01784 435 561
Claire Peers
Marketing, Wilkins Kennedy
Tel: 01962 852263
