Insolvency rates likely to rise

A recent insolvency report suggests that global insolvency rates will rise this year for the first time since the aftermath of the 2008 financial crash, with the UK being the worst hit in the developed world.

According to the report, business failure rates will increase by 10 per cent this year across the UK and by 2.7 per cent across western Europe. The report found that the UK will be hit hardest because continuing Brexit uncertainty has brought delay to Sterling recovery, kept inflation elevated and prolonged the drag on business investment.

Meanwhile, the report forecasts 2020 as another difficult year for the UK, with a predicted five per cent insolvency increase if the Government asks for a Brexit extension before 31 October and there is a smooth transition. However, it says that the prospects of a no-deal Brexit or further delay to Brexit followed by a general election are likely to put further upward pressure on failure rates.

The USA is expected to see a rise of three per cent in business failures this year and of two per cent in 2020 on the back of trade policy uncertainty, higher tariffs on Chinese imports and increasing financial vulnerabilities.

One of the report’s authors said that the strain from a global economic slowdown, political uncertainty and trade tensions is evident, and is taking a toll on growth and contributing to the first global rise in insolvencies in a decade.

However, he added that business owners should not be threatened by this if they want to achieve growth. They must be prepared to face the challenges, protect their business from any potential negative impact, and formulate a robust trade strategy.

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