Company failures cost small firms sector £5bn over two years
Posted on: 15th March 2010
Almost half the UK’s small firms have been left out of pocket due to trading partners or customers going bust.
New research by small firms’ online service CreditPal claims that 43% of small companies have been affected over the past two years
Its research estimates that the cost to the small firms sector could be as high as £5.3bn.
CreditPal chief executive Chris Poll said: “The amount left owing to SMEs (small and medium-sized enterprises) as a result of company liquidations is shocking and threatens the survival of some UK businesses.
“It is imperative that companies take every step to mitigate their exposure to the risk of defaulted payments, especially as the economy climbs out of recession when the need for cash is even greater.”
He urges firms to regularly use credit reports and referencing tools to establish the credit-worthiness of their trading partners.
“Ignorance of a business or trading partners’ up-to-date financial position is not an excuse.”
The study estimates the average amount owed to an individual small firm is £7,500.
Knowsley Chamber members Tapes for Industry has suffered losses from the collapse of clients over many years, including four of its customers in the past two months.
Seamus Brady, former Knowsley Chamber of Commerce chairman and director of the firm which employs 11 staff making a wide variety of adhesive tapes for customers, blames lax insolvency laws.
He said: “The insolvency law is an ass.
“Recently four of our customers have collapsed which leaves us out of pocket and there is never any recovery of monies.”
He added: “The arrogance of insolvency practitioners staggers me.
“When they contact you it is days or weeks later and by then all the stuff we have provided to our customer has been used by a newly-established company.
“We have never had a penny back in 30 years from companies that have gone bust"
