| |
Debt Problems for Businesses and Consumers Alike |
| |
The following is an adaptation of two articles appearing in www.scotsman.com on November 5th and 7th, 2005.
A double-edged sword
Bankruptcy reaches record levels
A record number of Scots are declaring themselves bankrupt, prompting warnings from finance experts that Scotland´s debt crisis is spiralling out of control.
A total of 1,461 people declared themselves bankrupt north of the Border in the three months until October - up from 1,307 in the previous quarter. With eight weeks still to go, the number of those declared insolvent so far in 2005 has already outstripped the total for the whole of 2004.
Elsewhere in the UK, personal bankruptcies are at their highest level in four decades, with business leaders blaming Britain´s credit card culture and opposition politicians blaming the slowing economy.
Matt Henderson, recovery and reorganisation partner with Grant Thornton, the company which compiled the data, said:
"Given the depressed state of the housing market, coupled with the prospect of a slowing economy and high levels of credit card debt we are facing an extremely difficult two to three years. Many people will find themselves with years of financial problems ahead of them and are choosing bankruptcy as a means of escape."
Experts at PricewaterhouseCoopers (PWC) predict that personal insolvencies in Scotland could reach 5,000 by the end of the year. Personal insolvency cases have peaked in England and Wales with 17,562 cases reported in 2005 so far, according to the Department of Trade and Industry. In total, more than 64,000 consumers have become insolvent throughout the UK in the past 12 months.
High street failures rise 9%
However, its not only consumers who are experiencing troubled times, businesses are also struggling to cope. Scores of retail businesses are expected to go to the wall this year, as the high street slowdown takes hold. Business failures in the retail sector are set to peak at 1,047 in 2005 - 9 per cent up on the 960 recorded last year.
Stalling consumer confidence, slow economic growth and increasing price competition are conspiring to push the mounting number of retailers under, according to a report by business restructuring experts at BDO Stoy Hayward. "Many retailers are holding their breath to see whether Christmas delivers the expected uplift in trade," said David Hill, the company´s business restructuring partner in Scotland. "For retailers who´re trading behind budget, the Christmas period is particularly important.
The firm´s Industry Watch report, released today, anticipates that grocery and clothing retailers will be the hardest hit during the final quarter, accounting for 33 per cent of predicted failures, as consumers pull in the purse-strings.
Electrical retailers, meanwhile, are expected to show the sharpest increase in business failures on the year - more than doubling to 141 from 69 - as spending on luxury items is curbed.
However, the report also anticipates brighter times ahead. Retail business failures are forecast to fall to 1,005 in 2006 - down 4 per cent on the year - and to 914 in 2007, an annual decline of 9 per cent.
The BDO report follows a warning that shops are heading for Christmas "Armageddon", with high-street sales at their weakest for two decades. Retailers have already started slashing prices in a drive to attract reluctant festive shoppers, as experts claim 2005 is the "most difficult year in modern times" for the sector.
Hill added: "In acute stages of distress, retailers may experience difficultly in securing enough credit to buy stock or have to resort to quick fix solutions, such as slashing prices to raise cash, regardless of whether it´s sustainable.
He said retailers should consider whether they need additional equity to fund any downturn in business and whether it had an appropriate funding structure in place.
"In the current market - where shoppers are increasingly price savvy - a regular review of market positions and pricing strategies is essential for all product ranges," he added.
For this and other news items please visit www.debtscotland.com . By registering on the site you will find a host of debt recovery and credit control tools in the free credit resources section.
Stephen Cowan
Yuill & Kyle, debt recovery & credit control lawyers, Scotland
79 West Regent Street, Glasgow G2 2AR
scowan@yuill-kyle.co.uk
Direct Dial: 0141-572-4251
www.debtscotland.com
www.ykcreditcheck.co.uk
|
| |
| |
| Back |
| |
| |
