More businesses risk going bust

22/10/2009

More and more businesses are set to go bust over the months to come - increasing unemployment figures.

Analysis from the UK Insolvency Helpline, an organisation that assists people seeking solutions to their money problems, suggested the firm has experienced increasing demand over recent months.

In particular, a 30 per cent rise in calls from businesses in trouble has been noted.

High-profile victims of the credit crunch and recession have included retailers Woolworths and Zavvi and travel firms XL and Zoom.

Meanwhile, business rescue firm Begbies Traynor recently predicted that the number of companies in distress would increase towards the end of 2009.

The organisation also said that the number of businesses with "critical" problems had risen by 37 per cent between August and September.

Firms having financial problems can look to reduce their wage bills by imposing pay freezes or making staff redundant.

Corporate failures also boost unemployment, with around 30,000 people losing their jobs through the collapse of Woolworths alone.

A UK Insolvency Helpline spokesman said: "We are seeing a huge increase [in calls] across the board, from all different types of companies."

Kevin Still, EuroDebt director, added: "Business failures affect not only the business owners, but also the employees. Many small business proprietors use personal finance like credit cards to prop up their business and this can go horribly wrong when personal guarantees are called in, which may include their home.

"For employees, many of whom could have worked for the business for many years, the consequences can be very disturbing. loss of income has become EuroDebt’s number one reason for people starting a Debt Management Plan or an IVA. For the employees and sometimes the business owners there may be little notice, especially if it is the company’s bank or cashflow funder that pulls the plug. It is evident that most banks are very unsympathetic to small businesses in difficult times and the withdrawal of working capital funding has hit many businesses, especially in sectors the lenders and credit insurers regard as 'high risk'."

Tags; Young Family Finances, Job loss, Recent Graduate Debt,

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