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Midlands Could Bump on Lack of Corporate Recycling- 30/05/2008
The credit crunch and fears of a recession could take their toll on the Midlands economy, an insolvency lawyer is warning.
FBC Manby Bowdler LLP partner Brian Aikman fears that a Midlands economy now largely built on services does not offer the same scope for recycling of assets as previously. He says: “2008/9 is likely to be a tough year for Midlands business.
“In the recession of the late ‘80s, businesses had asset bases of capital and skills, they owned property, land, plant and machinery – and management would often seek to buy back failing businesses out of receivership, saving jobs and returning capital to the Midlands market place.
“Now, with so much of our industry based on services, with small numbers of employees, no stock to speak of, serviced offices and equipment running to but a few laptops, there aren’t the same opportunities for the recycling of assets and expertise.”
Figures this month from the Insolvency Service show a jump of 17% in corporate insolvencies comparing the first quarter of 2008 with the last quarter of 2007. Aikman fears an implosion if failures continue to climb.
He says: “Business folk have been quite philosophical about the economy over the past five years. But this year has a different feel about it.
“People I speak to recognise that the consumer credit and property indicators have declined markedly over the last six to nine months while raw material, fuel and transport costs continue to rise. Predictions of gloom in the last few years have proved unfounded but this time around it looks like we're heading for a bump.”
But he advises against panic. “Businesses will be best placed to ride out the tough times and emerge stronger if they recognise early signs of financial distress and do all they can to manage their way through the downturn,” he concludes.