Experts predict a rise in insolvencies

News Article - 10 December 2007
Category: Business

There could be a ten per cent increase in corporate insolvencies in the new year, according to some industry experts.

Reported in the Times, the insolvency department at PricewaterhouseCoopers claimed that by looking at 2001 - 02 figures, when a similar economic downturn occurred, the department could see a five per cent to ten per cent increase in business.

The newspaper attributes the rise to a tightening of lending conditions by the banks and also a more cautious approach by hedge funds and private equity groups.

"There has been a suspension of normal trading conditions in the last few years," said Phillip Davidson, KPMG's head of restructuring advisory.

"Companies have been kept alive artificially, but now they'll be caught up."

Stephen Akers, a recovery and reorganisation partner at Grant Thornton, told the newspaper that troubled firms may "limp on", but that by early April they will have run out of options and the impact of the credit crunch will be evident.

Credit insurer Atradius recently told the Daily Telegraph that a number of medium-sized businesses are going bankrupt after the volatile market conditions have spread to their trade credit.

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