Although the UK economy is slowly emerging from recession, the effects of the economic downturn have left many businesses weakened. With cuts in government spending, fears of a ‘double dip’ recession are widespread.
Recent research carried out by R3, the trade body for insolvency professionals, reveals that more than a quarter of small businesses in the UK (those with a turnover between £50,000 and £1 million) fear they will become insolvent should the economy suffer a double dip recession.
R3 President Peter Sargent commented, “The low level of business confidence is to be expected. Many struggling businesses drew heavily on their reserves in order to survive and their resources have now begun to run out.
“It is easy to forget that banks are not a company’s only creditors: for many their largest creditor is the Government. With close to 300,000 firms in crucial ‘time to pay’ tax arrangements with HMRC, it seems that a large number of businesses are in need of a financial health check.”
The research showed that owners of manufacturing businesses are the most positive, with fewer than one fifth believing that their businesses will be at risk if the economy suffers a further setback. The hotel and catering sector was the least positive, with almost half of businesses fearing that another recession of similar magnitude could result in them becoming insolvent.