Fewer businesses went bust over the past recession than feared, according to professional services firm BDO.
Fewer businesses went bust over the past recession than feared, according to professional services firm BDO.
Business failures peaked in the first quarter of 2009 at 26,165 then declined, well before the economy returned to growth. This is contrary to the pattern seen in past downturns, claims Shay Bannon, BDO’s head of business restructuring.
Says Bannon, ‘Historically business failures are lagging indicators and continue rising well after the economy has turned. So we were surprised to see that business failures rose far less than expectations through this recession and indeed less sharply than during previous recessions.’
BDO’s research suggests that between 3,600 and 4,900 business failures were prevented due to falling mortgage and interest payments which boosted consumers’ disposable income and corporate profitability.
A further 1,600 to 2,000 businesses survived thanks to the government’s “time to pay” scheme that offered businesses the chance to defer tax payments, while roughly half that number owe their continuing existence to the VAT reduction, finds the research.
Bannon adds, ‘Other factors that have helped businesses weather this downturn have been that banks have been more flexible when it comes to late payments; we’ve seen more elasticity in the labour market; and, I think on the whole, businesses have learned from the hard lessons of previous downturns.’
