Slowdown leads to insolvency rise

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The Independent Online
CORPORATE insolvencies have hit a three-year high, with more expected in coming months as the economy slows.

Department of Trade and Industry data shows there were 3,346 company insolvencies in the last quarter of 1998, 6.8 per cent up than the period in 1997 and the largest quarterly total since early 1996.

Insolvency experts said the jump was just the tip of the iceberg. Economists regard insolvency data as a lagging indicator - it takes time for a slowdown in demand to feed through into corporate profits.

Steve Hill of accountancy firm PricewaterhouseCoopers predicted that insolvencies could surge by up to 40 per cent over the next two years. The PwC economic model suggests corporate insolvencies will rise from 13,203 in 1998 to 16,000 in 1999 and 18,800 in 2000. If UK growth is lower than expected, the picture could be worse - the PwC model assumes that the UK avoids outright recession.

Mr Hill said: "Although gearing levels are certainly lower than in 1990, the most vulnerable sectors include construction, hotels, restaurants, engineering and transport."

A separate study found that the slowdown was continuing to undermine employment. Figures from NTC Research revealed falls in demand for permanent and temporary staff. The NTC figures point to a further easing of pay pressures. The survey showed that the rate of growth of pay for permanent and temporary staff slowed to the weakest seen in the study's 16-month history.