The spectre of public sector cuts may halt the fall in company insolvencies witnessed in 2010, PricewaterhouseCoopers (PwC) has warned.
According to the auditor's latest corporate insolvency figures, 15,894 firms hit the wall in 2010. This was down by 3,618 in 2009, when 19,512 UK firms went bust.
The firm’s figures also showed that more than 3,600 firms went under during the final quarter of 2010, which was 19 per cent fewer than in Q4 2009.
Mike Jervis, business recovery services practice partner at PwC, warned that the downturn in insolvencies may not be long term.
“2010 has seen insolvency volumes stabilise as businesses are proactively managed in intensive care, and options other than insolvency are pursued with vigour,” said Jervis.
“However, UK businesses are certainly not out of the woods yet, as we expect looming public sector cuts to hit the bottom line of many public sector suppliers."
Therefore, businesses need to prepare themselves for the economic impact these cuts could have on them, Jervis said.
He added: “These economic challenges need to be factored into company cashflow forecasts and scenario planning should be a key discipline. Key risks are loss of demand or increases in uncontrollable costs.”
PwC’s data also marked out London as the insolvency capital of the UK. Additionally, the east, south and west of England all showed a marked rise in insolvencies during 2010.
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