The chances of companies collapsing are increasing by the month, according to a new study from RSM Tenon.
Is your contractor umbrella company one of them?
The company discovered that firms at high risk of collapsing increased by 3% each month, compared to the previous quarter’s figures.
RSM Tenon’s head of recovery, Carl Jackson, said that although we are no longer in recession, high oil prices, inflation and the government austerity measures are all affecting UK businesses.
Worst hit on the Traffic Light report are property companies. This month, the sector has seen a 17% month on month increase in firms at high risk of insolvency.
Meanwhile, UK enterprises rely more heavily on debt finance than nearly every other European country.
Creditreform, a German credit rating agency, analysed the financial statements of over four million European firms and found that only businesses in Italy and Ireland had more exposure to loans and external creditors than the UK. In fact, 31.4% of companies in the UK had an equity ratio under 10% in the 2009 financial year. 23% of German companies had an equity ratio less than 10%, whilst only 14% of Swedish firms were in a similar situation.
Creditreform concluded that the increased risk of insolvency is directly linked to weak capitalisation and financing problems are particularly prominent in nations where a lot of firms have an equity ratio less than 10%.
Martin Williams from the credit agency Graydon, says this research shows that businesses in the UK had followed the pattern of individuals are relied too heavily on debt. Because of the high level of indebtedness, we were not prepared for the recession and businesses found it very hard to get hold of more finance.
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