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Monday, 18 June 2012

Graydon Insolvency Predictor predicts flat insolvency levels

The credit referencing agency Graydon has predicted a flat rate of company failures in the second half of 2012 but warns that certain sectors are likely to have elevated levels of insolvency.  The Graydon Insolvency Predictor says that it expects the number of company liquidations to increase by only 1.4% from the rates seen in the first half of 2012.  But the figures will show a fall of 4.8% in the period when compared to 2010.  However it goes on to say that the projected failure rates in retail, construction, and real estate will go up between 2% and 5%.  This is not surprising given the state of the economy and confidence.    Construction is going to be hit harder later in the year as more Government projects are coming to and end and the pick up in demand from the private sector is not materialising. Retail is going to continue to suffer for reasons that we are all familiar with. However, an increase in vacancy rates will further compound the problem as footfall is affected given the lack of choice that the high street or shopping centres give.


In practice, this means that companies in construction, retail and real estate are 2.6 times more likely to collapse in the present market than those in the other sectors covered by the data, including such support industries such as those providing accounting, marketing and project management services.

So given the difficult state of the economy how come more businesses are not going into liquidation?

Reasons

  1. Lack of pressure from HMRC and Banks
  2. New companies not taking market share from existing providers
  3. "Zombie companies"with historic debts kept going due to point 1
  4. A period of stagnation and inaction as a result of uncertainty in global economy.



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