Feb. 5 (Bloomberg) -- As many as 5,000 U.K. companies may file for bankruptcy this year as the economy worsens, according to a report by accounting and insolvency firm KPMG.
The number of firms that enter administration or receivership may jump 55 percent from 3,225 in 2008, KPMG said in a statement. Consumer goods companies will suffer more than other industries as buyer confidence remains "at a low ebb." Retail insolvency appointments soared in January, rising fourfold compared with the same period in 2008.
"The downturn is now firmly entrenched in the real economy," said Jim Tucker, an insolvency consultant at KPMG. "There are hardly any sectors that have not been hit. We expect a very significant number of companies to be forced to renegotiate or restructure."
The British economy will shrink until the fourth quarter as global growth reaches the slowest pace in 60 years, the National Institute of Economic and Social Research said yesterday. Consumer confidence is at its lowest in at least four years and the central bank last month cut its interest rate to the lowest level since the 315-year-old bank was created in a bid to kick-start the economy.
The speed of the economic downturn is likely to thwart some firms' efforts to avoid bankruptcy by restructuring their businesses, said Tucker. It is "inevitable" that some will run out of cash before completing a reorganization, he added.
Companies offering travel and leisure services, chemicals, industrial products, energy or natural resources face declining demand and dwindling cash flows this year, said KPMG.
"Waiting until cash becomes the critical issue is a sure-fire way of destroying the confidence of lenders," said Tucker. "Those companies that delay approaching their creditors are at grave risk of failure."
The number of firms that enter administration or receivership may jump 55 percent from 3,225 in 2008, KPMG said in a statement. Consumer goods companies will suffer more than other industries as buyer confidence remains "at a low ebb." Retail insolvency appointments soared in January, rising fourfold compared with the same period in 2008.
"The downturn is now firmly entrenched in the real economy," said Jim Tucker, an insolvency consultant at KPMG. "There are hardly any sectors that have not been hit. We expect a very significant number of companies to be forced to renegotiate or restructure."
The British economy will shrink until the fourth quarter as global growth reaches the slowest pace in 60 years, the National Institute of Economic and Social Research said yesterday. Consumer confidence is at its lowest in at least four years and the central bank last month cut its interest rate to the lowest level since the 315-year-old bank was created in a bid to kick-start the economy.
The speed of the economic downturn is likely to thwart some firms' efforts to avoid bankruptcy by restructuring their businesses, said Tucker. It is "inevitable" that some will run out of cash before completing a reorganization, he added.
Companies offering travel and leisure services, chemicals, industrial products, energy or natural resources face declining demand and dwindling cash flows this year, said KPMG.
"Waiting until cash becomes the critical issue is a sure-fire way of destroying the confidence of lenders," said Tucker. "Those companies that delay approaching their creditors are at grave risk of failure."
