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Fire Sales of UK Businesses Tipped to Escalate in 2011


Could 2011 be a period of opportunity for savvy investors in or into the UK?

Many smaller companies remain under the cosh.

Those that have taken advantage of HMRC accommodation in deferring various payments are now seeing the tax man coming back and looking to recoup the deferrals

The banks having toed the political line to an extent now seem to be regaining confidence in turning the screw and the decision making process is extremely ponderous and unpredictable. Businesses shouldn’t count on the renewal of financing arrangements.

Some of the UK’s largest corporate lenders – including RBS and Barclays – are expecting a rise in the number of small company insolvencies. According to insolvency practitioners, corporate failures are expected to rise next year to 27,500, compared to last year’s 26,400.

Could this be a degree of pump priming by lenders in expectation of a little stable cleansing?

It could easily force some fire sales of fundamentally good businesses so investors need to be alive to the opportunities that could arise but cash will be king and don’t expect much support from the banking community unless provision of finance helps the funder concerned improve their level of protection against loss.

 

Author: Chris Slay

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