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Insolvencies to peak in 2010 as state props are withdrawn

THE rate of corporate failures will accelerate in the second half of 2010 as government stimulus measures are unwound, insolvency specialist Begbies Traynor warned yesterday.

The firm said 140,000 British companies suffered significant financial problems in the fourth quarter despite measures such as quantitative easing and the 2.5 per cent VAT cut.

Begbies Traynor executive chairman Ric Traynor said the removal of state-funded props meant the landscape would become bleaker after June. The construction sector is particularly vulnerable as it has benefited more than others from the HMRC’s flexible “time-to-pay” tax scheme, Traynor said.

He added: “With tax and interest rates certain to rise, as well as increasing pressure on consumer spending, there is every reason to suggest that the insolvency peaks of this recession remain some way off.”

The automotive sector suffered the most in the three months to January despite the extension of the car scrappage scheme, with critical problems up 26 per cent on the previous quarter. Consumer-facing businesses were buoyed by Christmas trading, however, seeing a 32 per cent improvement.