Posted: 15 December 2011
Issue: Online only
Categories: Update, News, Other

Warning of more misery as insolvencies grow by a third

Business failures in the accounting sector have increased by a third since the economic downturn took hold in the UK – and it is small high street firms that are bearing the brunt, according to Bloomsbury Professional, publisher of financial and legal information.

The most up-to-date figures from the Office of National Statistics show 12,255 accountancy insolvencies over three calendar years, from 3,580 in 2008 to 4,720 in 2010: a rise of 32%.

During a similar period – 2009 to 2011 – the number of operations with an annual turnover of less than £100,000 fell by more than 1,000, from 20,800 to 19,790. Accountancy practices within the sub-100K bracket represent about 60% of the total number in the country.

Bloomsbury Professional warned that the latest figures add up to show the extent to which small high street accountancies are suffering, with many struggling to cut costs in an attempt to survive, as larger rivals compete more aggressively and a growing number of owner-operated clients choose to manage their own tax affairs.

‘There was a widespread belief that the accountancy profession would be relatively insulated from the recession,’ said Martin Casimir, publishing director at Bloomsbury Professional, ‘but that clearly hasn’t been the case for many of the smallest firms.’

Those practices – which find it difficult to pass on rising costs to clients and so often end up absorbing the increase themselves – could soon face further distress once HMRC puts an end to its Time to Pay scheme that allows struggling firms to defer tax: an opportunity that currently means ‘the difference between survival and extinction’, claimed Mr Casimir.

‘With the 31 January tax payment deadline looming and the government rejecting an increasing number of Time to Pay applications, many small firms are going to have a nervous couple of months trying to scrape the money together,’ he said.

 

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