100,000 firms in danger of going bankrupt, expert says

A top London insolvency expert today warned that 100,000 businesses face collapse in the next two years, putting up to one million jobs at risk.

Nick Hood, executive chairman of Begbies Traynor, told the Evening Standard that as many as 50,000 firms in the UK could become insolvent in 2010 and then again in 2011, steeply increased from this year's approximately 32,000.

The sharp rise would add between 500,000 and one million people to the unemployment total as the economy suffers a dreaded "W-shaped" rather than "V-shaped" recession.

Hood said: "We could be half way up the 'V' or getting close to the second fall of the 'W'. My guess is the latter. A second correction is coming.

"I have an awful feeling that people do not understand how bad this really is. The pain is being delayed."

He said "now is the most dangerous time for businesses" because as the economy improves firms cannot get hold of the working capital they need to meet the increased workload.

"These businesses will not find the money to support the growth," said Hood. "Banks don't have the money to lend. The big story of 2010 will be businesses failing not because of the recession but because of the recovery."

The sectors most at risk, he argued, included retail, construction, printing and professional services such as lawyers and accountants. "The carnage will be among small and medium-sized businesses - good, old owner-managed, salt-of-the-earth, engine-room-of-the-economy companies," he said.

"History says it takes between one and two years for insolvencies to peak. There is a possibility that 2011 will be every bit as bad as 2010."

Hood said much of the pain has been delayed because government schemes - such tax breaks and the cut in VAT from 17.5% to 15% - have helped to keep more firms in business and more people in work than would normally be the case in a recession.

However, he warned that when the stimulus is withdrawn, firms will be hit by the full extent of the downturn.