Rate of company failures expected to increase

More than half of UK businesses expect company insolvencies to increase over the next year, research by PricewaterhouseCoopers has revealed.

Manufacturing companies were found to be the gloomiest about their prospects, with three quarters predicting a growth in business failures over the next 12 months.

Fewer than one in seven businesses believed that insolvencies would actually fall in the next year.

The survey of 501 managing directors, financial directors and other senior managers found that complying with regulation was the main problem, with three out of ten respondents citing regulation as a major financial risk for businesses.

The amount of corporate debt was also another major problem, with nearly one in five companies regarding debt as the biggest threat to their survival. Construction companies were particularly concerned about the levels of corporate debt, with four out of ten citing it as the biggest threat to their stability.

Consumer confidence levels were also cited as a major risk. However, less than 5% of UK businesses regarded the cost of meeting pension obligations as a major threat, in spite of the level of company pension deficits.

Colin Haig, partner in the Business Recovery Services team at PwC said: “Rising levels of corporate debt and record low levels of consumer spending are twin perils facing struggling British business. We are seeing lots of companies who are already showing signs of distress, looking nervously at rising raw material prices and the cost of increased regulation.

PwC warned that the impact of the new Pension Protection Fund could also result in a “double whammy” for businesses that are already in difficulty. He said: “Companies who are already cash strapped should start planning now so that they are well placed to deal with the levy when it arrives.”

(KMcA/SP)