Public Sector Spending Cutbacks Expected To Trigger A Surge In Business Insolvencies

26/07/2010

By Jane Lougher

New research conducted by commercial credit reference agency Graydon UK reveals that four out of five credit managers believe that public sector spending cuts will spark a sharp increase in business insolvencies within the next 12 months.

According to the survey, nearly two thirds (64 per cent) of credit professionals anticipate that business failure rates will rise by more than 10 per cent during the coming months, with 13 per cent of those questioned forecasting that the insolvency hike will exceed 20 per cent as public sector agency buying power is diminished.

Despite this warning from credit professionals that...

...the knock-on effect on the wider economy is set to be painful, only one third of the companies they represent (33 per cent) are already monitoring actively their customers' reliance on public sector contracts as a source of revenue as an established part of their own supply chain risk management process.

Meanwhile, despite the looming prospect of a surge in company failures, just under half (49 per cent) of credit managers questioned agree or strongly agree that a rise in business failures will be a price worth paying in order to restore the UK's future economic stability.

Martin Williams, Managing Director, Graydon UK, said: "Credit managers are clearly well aware of the potential consequences of scaling back public spending at the rapid pace being advocated by the new Government. But despite the prospect of a commercial insolvency boulder gathering momentum as it rolls down the economic hillside, the potential dangers have not yet been recognised by other operational areas.

"Firms need to heed this warning now and ensure they are fully equipped to monitor exposure to public sector based revenues across the entire length of their supply chains. The failure of a key supplier or customer dependent... continued on page two >

 

 

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