Trade Indemnity, which underwrites pounds 70bn of credit risks a year, said the number of companies going bust could rise by 15-20 per cent as the strong pound, the slowdown in Tiger economies, the minimum wage and higher interest rates take their toll. It warned that the outlook was particularly uncertain for small companies dependent on the retail industry and exporters.
Ralph Snedden, Trade Indemnity's commercial director, said he expected both company failures and the premiums charged for credit risk insurance to rise this year.
"If you take into account the risks and uncertainties that are around, particularly for exporters, then the outlook is not great. An awful lot of companies who have kept going in 1997 might find it difficult to keep their heads above water in 1998, particularly if sterling stays around its current level."
This analysis contrasts sharply with that of Dun & Bradstreet, which last week reported an 11.5 per cent drop in business failures last year and predicted they could be down to pre-recessionary levels by the millennium. In 1997, a total of 36,368 businesses failed compared with 28,935 in 1990.
But Trade Indemnity believes the decline in bankruptcies has gone as far as it is likely to this business cycle and will now start to climb. It says that suppliers to the retail industry will feel the pinch through the increasingly stringent demands on price and quality.