Below are some excerpts taken from an excellent report from RSM Tenon
Even if your business is not distressed the impact of the macro economic position; e.g. €1.2tr European lending which is distressed, will be far reaching and impact on customer demand in Europe which will indirectly affect everyone..
These excerpts are shared as in support of our collaboration with RSM Tenon.All credit and quoted extracts from RSM Tenon’s insolvency report to June 2012..
Stress in the UK economy?
Snapshot of January to June 2012
- 11,892 UK companies became insolvent in the first two quarters of 2012
- The Business Services sector had the largest volume of insolvencies with 2,835 (26% of total English corporate insolvencies)
- 146,000 ‘zombie’ companies are teetering on the edge*
- 204,358 companies are at high risk of insolvency at the end of June 2012
- The sectors with the highest risk of failure are furniture manufacturers, textile manufacturers, construction and hospitality & leisure
What is a zombie business?
A company which is at high risk and nearing the point of insolvency but is still able to hang on, neither failing nor thriving.
The zombie signs:
- Just being able to pay the interest on debts, but not reduce the debt itself
- In the event of a rise in interest rates, the business will be unable to pay its debt at all
- Currently struggling to pay its debts when they fall due
- Having to negotiate payment terms with suppliers
What are the reasons we are not seeing a rise in Corporate Insolvencies?
- Lender and general creditor forbearance with troubled companies
- Still very low interest rates, meaning businesses can continue; unlike previous recessions where the interest rate burden was a major cause of failure
- Zombie businesses – “Pretenders and extenders” are still very much prevalent (see previous page), but at some point the un-repayable debt burden will have to be faced by many companies
The sectors remain at highest risk of failure in the UK?
All credit and quoted extracts from RSM Tenon’s insolvency report to June 2012
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The statistics within this newsletter have been produced using RSM Tenon’s interactive online monitoring system, Tracker. Tracker has been designed to analyse financial risks and give a clear and early indication of business risks. The information is collected from an extensive range of real-time and trusted data sources.. To learn more visit www.tracker-online.com Other sources of information
The Office of National Statistics, Insolvency Service, R3 and the Accountant in Bankruptcy websites have also been used as a source of information for this newsletter.