Almost £5bn of unpaid debt is left behind by businesses that close down each year – on top of the £11bn debts left by insolvent firms, figures published today reveal.
Firms that opt to close down – rather than being wound up via official insolvency proceedings – owe an average of £4.7bn each year, according to research by the credit reference agency Experian. Its analysis examined millions of supposedly solvent firms that have closed down voluntarily and applied to be struck off the Companies House register since 2000.
Each year around 13 per cent of these firms had debts that exceeded their total assets just before they closed.
Whilst micro firms often wind up for reasons as simple as retirement or the opportunity to work in another company as an employee, so have little impact on other firms and leave behind little or no debt, some of these businesses close down without informing creditors or settling debts.
In 2011, Experian found that of 300,000 firms that had wound up voluntarily, 36,000 had debts amounting to £5.9bn, whilst a further 21,000 firms declared insolvent during the same year dumped debts worth £11bn.
Max Firth, a managing director of Experian, said: "For the first time, we have been able to show that hidden among these seemingly harmless business closures is a level of debt that has previously gone undetected."Reuse content