Economy
Business failures set to increase as Coalition imposes cuts |
|
|
| Economy | |
| Written by Gary Howes | |
| Monday, 26 July 2010 | |
|
Almost two thirds of credit managers expect business insolvencies to leap by more than 10 per cent.
George Osborne's hopes that a private sector surge will prop up the UK economy appear to be misplaced. According to the survey, nearly two thirds (64 per cent) of credit professionals anticipate that business failure rates will rise by more than 10 per cent during the coming months, with 13 per cent of those questioned forecasting that the insolvency hike will exceed 20 per cent as public sector agency buying power is diminished. Despite this warning from credit professionals that the knock-on effect on the wider economy is set to be painful, only one third of the companies they represent (33 per cent) are already monitoring actively their customers’ reliance on public sector contracts as a source of revenue as an established part of their own supply chain risk management process. Meanwhile, despite the looming prospect of a surge in company failures, just under half (49 per cent) of credit managers questioned agree or strongly agree that a rise in business failures will be a price worth paying in order to restore the UK’s future economic stability. Martin Williams, Managing Director, Graydon UK, said: “Credit managers are clearly well aware of the potential consequences of scaling back public spending at the rapid pace being advocated by the new Government. But despite the prospect of a commercial insolvency boulder gathering momentum as it rolls down the economic hillside, the potential dangers have not yet been recognised by other operational areas. “Firms need to heed this warning now and ensure they are fully equipped to monitor exposure to public sector based revenues across the entire length of their supply chains. The failure of a key supplier or customer dependent upon Government contracts could inflict huge damage to business stability at very short notice.” In addition to public spending cuts, the survey also revealed that four fifths (79 per cent) of respondents agreed that the rising number of rejections by HMRC to businesses applying for its Time to Pay tax deferral scheme will add to predicted rise in insolvencies across the UK. Martin Williams added: “HMRC is clamping down on firms’ requests for additional time to meet their tax liabilities. Credit managers are already anticipating the critical impact this could have on businesses already struggling to meet their other financial obligations, in particular those who did not set cash aside to pay the tax man when times were good economically. “And although firms can take steps to assess how they will be affected by public spending cuts they cannot anticipate how they will be affected by the winding up of the Time to Pay programme as HMRC has refused to publish a list of applicants.
|
|
Digg it! 
del.icio.us 
Newsvine 
Reddit 
Stumble It! 
