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Wednesday, 27 January 2010

Begbies Profits Warning Highlights Insolvency Market Weakness

Despite guiding the markets that profits might be AHEAD of plan in the current financial year, as recently as 10th December, a shock profits warning yesterday reduced the group's shares by 12% to 93p.

The expected avalanche of failures, forecast by Begbies and others, post Christmas didn't materialise for the insolvency profession in the UK, it seems.

With the news that the economy grew in Q4 by a feeble 0.1%, will this recession be marked by a "non-peak" of insolvencies?

My view, which Begbies blamed for their profits warning, is that the Time to Pay (TTP) Scheme provided by the HMRC has led to a "skew" in the market. A new Government, without the need to curry favour with voting SME businesses, may want to crack down on tax collection to get the much needed tax revenues flowing. So my guess is insolvency numbers will rise markedly towards the end of Q3 2010.

Then TTP will be much tougher to obtain and company voluntary arrangements will be the method choice for struggling viable companies.

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