Crisis in credit markets is likely to drive a sharp increase in corporate failure, according to a report released today by Kroll.
“There is heightened market expectation of a significant increase in corporate restructuring, and indeed insolvency, as businesses burdened with leverage rapidly struggle with an onset of less benign economic conditions and higher interest rates,” says Kroll in its Boom, Bang or Bust? report, which has been issued to mark Kroll’s twentieth anniversary in the UK.
One of the big questions the UK faces is whether these businesses will go to the wall or be propped up. The report reveals that, “many [executives] feel that the twin crutches of liquidity and stability have consistently acted to prop up businesses which otherwise would have collapsed.”
Twenty years of global, technological and financial innovation has made London one of the world’s leading financial centres. However, with stability has come excessive liquidity which has made it easier for companies in trouble to refinance rather than tackle the fundamental issues behind poor performance. The report identifies poor management as the main cause of business failure, linked to lack of information or unwillingness to change.
Kroll’s report is based on research from top pollsters Penn, Schoen & Berland, which surveyed senior business leaders and opinion formers and matched their responses with an analysis of the key forces that have shaped the UK economy.
See full Press Release.
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