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Future insolvency epidemic?

Date Added: Fri July 30 2010
British businesses have failed to return to pre-credit crunch levels according to new research from RSM Tenon, raising new questions over the UK’s economic recovery and concerns over the prospect of a new insolvency epidemic.

RSM Tenon’s Business Barometer found that 76% of entrepreneurs are still waiting for their business to return to the levels seen before the credit-crunch hit in 2007. Three years on and one in ten entrepreneurs believe it will take another three years for their businesses to return to ‘normal’ levels. 27% predict it will take one to two years and 20% think two to three years is a more realistic timeframe for business levels to be restored. The wobbly recovery is likely to threaten entrepreneurs’ plans as a double dip recession could re-infect businesses causing another epidemic of insolvencies. RSM Tenon believes there is likely to be more than 20,000 business failures this year.

The research, which questioned more than 300 entrepreneurs throughout the UK, also found the risk of a double dip recession has sparked 43% of entrepreneurs to review their business. Entrepreneurs are still suffering despite the recession officially coming to an end – 22% see a lack of cashflow as a serious threat to their business over the next 12 months.

Carl Jackson, Head of Recovery of RSM Tenon, said: “There has been little progress down the road to recovery and many entrepreneurs remain sceptical that they will see any meaningful revival in the near future.

“The problems caused by the credit crunch have continued to linger and show no signs of disappearing. Margins remain tight for businesses, with many owners still unable to secure the additional funding they need. Further failures are inevitable in this climate and we can expect to see 2010 corporate insolvency levels match the record totals that we have seen in the last two years.”