Small firms 'most at risk of insolvency'

News Article - 02 January 2008
Category: Business

Smaller companies should be performing a health check as they are the most likely to become bankrupt this year as a result of the credit crisis, reports the Financial Times.

The newspaper cites figures by credit insurer firm Euler Hermes which estimates insolvencies to rise 8.3 per cent during 2007 to 13,492. This will be the highest number since 2003, when the economy was in turmoil as a result of the dotcom crash.

Fabrice Desnos, chief executive of Euler Hermes' UK arm, said that the volatility of financial markets has led to "serious consequences" for business performance. Smaller companies are expected to be affected the most as they are more reliant on borrowing and the UK economy.

"The expected slowing of the economy next year and the rising cost of finance is a big factor, but we are also seeing an increase in late payments by companies," he explained.

Mr Desnos estimate that payment delays are currently higher than they have been in five years, with companies attempting to control costs by delaying an average of 22 days to recompense a supplier.

PricewaterhouseCoopers' insolvency department has predicted a five to ten per cent rise in department activity this year, reports the Times.

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