The number of businesses being forced into administration or receivership has risen sharply, figures have revealed.
According to a report from insolvency experts PKF Accountants & business advisers, the figures suggest the UK may be on the brink of recession.
The statistics showed the number of administrations rose to 858 in the first quarter of 2008 – 54% higher than the previous quarter, and more than 22% above the same period in 2007.
The group said the number is the second highest quarterly figure since the Enterprise Act changed the rules governing administrations in 2002.
Receiverships rose to 273 in the first quarter of 2008 – the highest level since 2003, and 145% higher than a year ago.
David Merrygold, PKF’s corporate recovery partner, said the figures are of ‘huge concern’.
“This is a barometer of business failure and shows the temperature is rising. While the government chooses to focus on liquidations, which show single digit percentage increases, the numbers of companies being forced into insolvency is rocketing.
“Clearly, banks are increasingly wary of lending more money to businesses they don't regard as cast iron while other creditors are tightening their payment terms, with many starting to demand cash up front for all but their most trusted clients,” he said.
“Thousands of small and medium sized enterprises are going to face increasing difficulty as cash flow starts to dry up. Most businesses had not expected fuel price hikes, with gas, electricity and diesel costs in particular adding to their costs.
“Regrettably, I think these figures are the tip of the ice berg and likely to get increasingly worse this year,” he added.
© Crimson Business Ltd. 2008
