 Latest insolvency figures mask corporate sector's pain
3 February 2012: Commenting on this morning’s fourth quarter insolvency statistics, Ian Gould – head of Corporate Recovery & Insolvency at PKF (UK) LLP – said:
“The most important message coming from today’s figures is that the surge in corporate insolvencies hasn’t hit yet. Although the number of compulsory liquidations and creditors’ voluntary liquidations is the highest since the final quarter of 2009, it’s still modest in historical terms and does not accurately reflect the pain being felt by the corporate sector at the moment.
“Looking behind the numbers, we’re seeing businesses stagnating or in slow terminal decline that are just about able to hang on thanks to low interest rates and forbearing bank managers reticent to pull the plug. There are real issues just below the surface that are not currently being addressed and which will eventually result in a significant jump in business failures. This poses a difficult question: is the closure of these so-called ‘zombie’ companies the price we all have to pay for a quicker rebound in economic activity and for allowing green shoots to push through? Whatever the answer, there is likely to be more pain ahead.
“Given little sign of any meaningful economic recovery, it is more important than ever that management objectively assess the situation and use their insight to make realistic forecasts about future cashflow. This will give them advanced warning of looming problems, provide them with some time to take evasive action, and potentially strengthen their hand in any subsequent negotiations with banks and other creditors. Burying your head in the sand and postponing tough decisions rarely works in practice – over the years, we’ve seen too many businesses that only start taking action when it’s too late.”
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For further information, please contact: Andy Konieczko, 020 7065 0537, andrew.konieczko@uk.pkf.com
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Notes to Editors:
1. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk
2. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Channel Islands) Limited is incorporated in Guernsey.
3. PKF (UK) LLP is a member firm of the PKF International Limited (PKFI) network of legally independent member firms. The PKFI member firms have around 2,200 partners and more than 21,000 staff in around 125 countries.
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