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News 13.5.13

‘Delay and pray’ attitude will keep economy sluggish – comment from CBW

News 13.05.2013

The Insolvency Service have released statistics showing insolvencies in the first quarter for 2013. There was a decrease of 5.3% on the previous quarter and 15.8% less than the same quarter a year ago. Carl Bowles, a partner and insolvency specialist at accountants CBW, said: “The low level of UK insolvencies, particularly administrations, is principally as a result of the banks’ policy of forbearance towards companies that cannot pay their debts. There has been a lot of coverage of households stuck in the “pay day loan” trap of paying only the interest, but never reducing the debt.  More and more businesses are in this situation too with no realistic chance they will pay their debts off. If a company is in short term difficulty and will realistically recover quickly, debt restructuring and forbearance is sensible and positive. However, the reality is that a lot of companies now are the walking dead and should be buried rather than being allowed to go lurching on, damaging others as they go. Closing zombie companies allows the remaining profitable companies to flourish and reinvest, indeed the market share taken up by zombies is damaging the good companies.  I am sure the UK is going to experience a sluggish economy as long as this “delay and pray” attitude continues towards keeping overly-indebted companies going.” (Source – CBW Press Release)