Corporate failures to rise
Article Date: Jan 21 2009More than 40,000 companies will be declared insolvent this year, according to the Credit Management Research Centre (CMRC) at Leeds University Business School.
CMRC forecasting models, which give companies an insolvency “risk score” based on their characteristics and performance, combined with financial health indicators such as orders and county court judgments, revealed that company failures will rise by 35 per cent this year compared with 2008, and an increase of more than 62 per cent compared with 2007.
Nick Wilson, professor of credit and finance at CMRC, said: “The fall in interest rates and the reduction in the value of sterling have alleviated the pressure on some companies, but these potential benefits are offset by falling operating profits in a highly leveraged corporate sector.
“In 2007, we correctly predicted a 20 per cent increase in insolvencies for 2008. It appeared then that insolvencies would peak in December 2009 and then start to fall. Our revised forecasts now show a persistently high failure rate into 2010,” he added.
The total value of country court judgments against companies in the UK climbed 26 per cent in 2008 from £324 million in 2007 to £408 million.
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