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‘Double-dip’ fear persists

Almost one in three northern businesses believe that they will become insolvent if the economy suffers from a double dip recession, according to new research by insolvency trade body R3.

The research, which looks at small businesses’ confidence in their financial stability, suggests that although the UK has emerged from recession, many businesses have been worn out by the struggle to stay afloat.

When asked how they thought they would cope if the UK suffered another recession of the same magnitude as the one that has just ended, one in six regional firms (17%) felt it was very likely that they would go out of business, with a further 13% thinking it was fairly likely they would suffer that fate.

The research found that, across the UK, the hotel and catering sector was the least positive with almost half (47%) of businesses saying that a double dip could result in their company becoming insolvent.

The most positive sector was the manufacturing industry. Less than a fifth (19%) of manufacturing businesses believe that they will suffer if the economy falters.

Linda Farish, incoming chairman of the North East arm of insolvency trade body R3 and director of Recovery & Insolvency at Newcastle-based accountants RMT, said: “The low level of business confidence is to be expected. Many struggling businesses drew heavily on their reserves in order to survive and their resources have now begun to run out.

“Many businesses drew heavily on their reserves in order to survive and these resources have now begun to run out. When an economy emerges from a recession, creditor behaviour changes as they believe they stand to achieve greater returns than they would have done during the downturn.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .