SME Risk Of Insolvency Rising

According to the latest quarterly small business risk index from a leading insurer, nearly one in six small or medium-sized businesses is at ‘high risk’ of going under in 2013.

The sectors vary in their level of concern, with retailers being most at risk. Of those polled, 21 per cent claimed to be at risk in the last quarter of 2012, which was up from 12 per cent in the third quarter.

In addition, nearly a quarter of small and medium-sized IT and telecoms firms say they face insolvency in the next 12 months, up from 11 per cent in the third quarter, while 37 per cent of construction-related firms believe they are at high risk, up from 33 per cent.

This outlook reflects a consistent view among the SMEs polled, with almost 80 per cent of them continuing to raise concerns about the current economic climate, and over 80 per cent are not confident that it will improve in the next quarter.

Meanwhile, campaigning group Bully Banks, which represents small businesses that have been mis-sold an Interest Rate Swap Arrangement (IRSA) by their bank, says that up to 4,000 SMEs have gone into administration because they were mis-sold costly insurance products.

The tens of thousands of small firms that have made mis-selling claims will see their battle for compensation come to a head this week as the Financial Services Authority makes a long-awaited statement into the matter.

Tim Close is an accountant specialising in business insolvency, debt recovery and business rescue.

Posted in News.