UK firms have been warned that they are at their most vulnerable as the economic tide begins to turn.
Insolvency experts have pointed to figures from recessions in the 1980s and '90s that show insolvencies peaking just as the recovery begins. Individuals and businesses are both more likely to go bust during this fragile time.
According to the Association of Business Recovery Professionals, this phenomenon is partly attributable to renewed aggression from suppliers. While firms have been willing to make compromises during the recession, many will now begin to pursue late payers and tighten up their terms.
The Association has said that corporate insolvencies after the 1990s recession peaked five quarters after the UK exited technical recession. Personal insolvencies, including those of self employed individuals, were at their highest level around three months later.
Businesses seem unaware of the danger of this so-called 'insolvency lag'. Insolvency practitioners are warning firms that they must take steps to prepare themselves for the risks posed in this period.
The Association expects to see 28,000 corporate insolvencies during 2010, and a further 27,000 during next year.
