Levels of corporate insolvency have remained relatively steady for the last few years, but that is about to change, according to insolvency trade body R3 – The Association of Business Recovery Professionals.

Government statistics, released on Friday, may show a rise in the number of company administrations and liquidations, with certain industries suffering the most as the result of turbulent conditions in the UK. Travel, tourism and agriculture could be the worst hit. The figure looks certain to rise in quarters one and two of 2008.

R3 Council member Peter Sargent from Yorkshire says, “I have heard on the grape vine that things are starting to change in the leisure and tourism industry. A good example of this is a wine stockist who says that, although the quantity of wine bought by restaurants has not changed, the quality has, so his customers seem to be going for the cheaper options.”

It is likely that smaller businesses will be the first to suffer, as in many cases the owners or backers have loans backed by personal guarantee. If either the individual or company find themselves in financial difficulty, one will have a knock on effect on the other. On top of this credit is becoming harder to obtain with smaller companies particularly vulnerable.

Peter added, “As soon as a business starts to have financial difficulties they should seek expert advice. Problems can be overcome if recognised and tackled early, but often people wait until it is too late, and the business has to be sold or liquidated."

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