After months of positive economic indicators, a report by Euler Hermes Group (part of global insurers, Allianz) forecasts a 5% increase in corporate insolvencies in the UK in 2016.
A number of factors are behind this economic prediction including sterling’s strength and anticipated wage increases impacting on companies’ competitiveness. It takes account predicted slowing down in economic growth, low inflation and the potential start of interest rate hikes. However, uncertainty surrounding the referendum on the EU membership is unhelpful.
Another issue relates to a significant number of new businesses created since 2012. These usually businesses have a high mortality rate. As many as 50% of new start-ups fail within the first five years. That can have a knock-on effect with other companies suffering bad debts.
But it is not all bad news as businesses which have already survived the recession are generally better prepared. Not only financially but in terms of experience not just to weather such blips but to capitalise on opportunities.