Sponsored by
The Science of Business: Rise in debt cases is a distress signal
County court judgments have risen by 29 per cent over the past 12 months signaling further corporate distress for UK plc as companies struggle with tightening cash flow and ready access to bank debt.
Research at the Credit Management Research Centre (CMRC) at Leeds University Business School, published in the UK Risk & Insolvency Report, indicate that the early signs of financial stress in the corporate sector are late payments and bad debts.
In the UK as a whole, the total value of county court judgments against limited companies rose by 31 per cent from 30.4m to 43.4m in the 12 months to November 2008. Meanwhile, the number of corporate insolvencies rose 9.3 per cent from 2,293 to 2,528.
In Yorkshire, county court judgments rose by more than 30 per cent to 3.7m with corporate insolvencies rising by 18 per cent from 254 to 309. Indeed, the North in general looks set to weather the recession better than others such as the South-East which has witnessed a 47 per cent rise in county court judgments and a 33 per cent rise in insolvencies.
The UK Risk & Insolvency Report can be accessed online at CreditScorer.com, a web-based analysis of all insolvencies and county court judgments which was developed by the CMRC.
The UK Risk & Insolvency Report tracks and forecasts the changes in risk for all UK corporate industry sectors and regions on a monthly basis and is an excellent bellweather of UK corporate activity.
As the credit crunch bites, the rise in county court judgments provides a very good barometer of corporate health. For many companies it is a vicious circle – they often resort to the courts to chase bad debts, but often, by the time it gets to court the debtor has gone out of business.
The county court data is a strong leading indicator of insolvencies which increased by 9.3 per cent. In some sectors, such as retail, construction, property, transport and business services, the number of county court judgments had increased fivefold over the past 12 months.
The rapid rise has prompted the CMRC to predict that insolvencies will rise sharply in 2009 with more than 40,000 companies failing, more than three times the pre-recession rate.
In 2007, we correctly predicted a 20 per cent increase in insolvencies for 2008. It appeared then that insolvencies would peak in December 2009 and then start to fall. Our revised forecasts show a persistently high failure rate into 2010.
Firms are under pressure. Given that the majority of businesses in the UK are small to medium enterprises which are already struggling with tighter bank lending policies the prospects for a further significant rise in corporate insolvencies is a grim economic reality.
For further information, visit the CMRC website at www.cmrc.co.uk or www.creditscorer.com
Nick Wilson is Professor at the Credit Management Research Centre at Leeds University Business School
Email to a friend
Print this page- Three-inch blanket of snow heading our way today
- Alan Shearer in list of favourites for Leeds and England jobs: Latest odds
- Barnsley’s Keith Hill invokes Fawlty Towers over link with Leeds job
- McCormack feels United search can be narrowed down
- Redfearn throws down gauntlet as queue builds at Elland Road
Looking for...
Featured advertisers
Jobs
Search for a job
Motors
Search for a car
Property
Search for a house
Weather for Yorkshire
Saturday 11 February 2012
Today
Sunny spells
Temperature: -2 C to 1 C
Wind Speed: 7 mph
Wind direction: South
Tomorrow
Cloudy
Temperature: 2 C to 5 C
Wind Speed: 8 mph
Wind direction: North west
