The long tail
The latest data from the Insolvency Service shows that the number of business failures is expected to fall by 21.6% from a peak of 26,196 in 2009 to a predicted 20,536 in 2015. However, the number of business failures will remain above pre-recession levels of 16,431 in 2007, as the recession will have a long tail.
Businesses are proving resilient given the uncertain global economic conditions with the number of business failures stabilising at a level below most expectations. Latest UK performance data illustrates a weakening as the economy expanded by just 0.1% in Q2, down from 0.4% in Q1. As a result the Office for Budget Responsibility (OBR) will almost certainly have to reduce its current GDP growth forecast of 1.7% for 2011, bringing it closer to our prediction of 0.6%. Market volatility due to the ongoing Eurozone sovereign debt crisis now looks set to severely disrupt global growth, however we believe that the biggest driver of business failures continues to be the poor outlook for UK households.
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