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Press Release

Fear of debt grows as one in four businesses are concerned about their debt levels

28 January 2011

The number of businesses that are worried about the amount of debt they currently owe their creditors has risen, by six percent, to a quarter (25%) over the last three months, according to research by insolvency trade body R3.

Over a third (34%) of those worried about their debts say they are worried about finance, overdraft and bank loans; the same percentage of businesses are worried about Crown debts, such as VAT; and a quarter say they are concerned about trade debts. In the last quarter, the number of businesses concerned about Crown debt and bank loans jumped 16 percent and 10 percent, respectively.

R3 President Steven Law commented:

"For many businesses, debt has become an increasingly important part of working capital, which may explain why the level of concern continues to rise. The fact that Crown debts are now a primary worry suggests that businesses may now be finding it harder to arrange Time to Pay agreements, and that the most distressed businesses are no longer able to negotiate repeat deferrals. The rise in concern over bank loans and other finance is likely to be because many businesses are experiencing a drop in profits which makes servicing debts more difficult."

Of those concerned about their debts, smaller businesses are likely to be more concerned about each type of debt than their larger counterparts. The contrast is most stark when comparing concern over crown debts which concerns almost four in ten (36%) small businesses, and two in ten (22%) medium to large businesses.

Steven Law concluded: "Larger businesses tend to have more collateral than their smaller counterparts which helps them when negotiating their finances. However, we would advise all businesses to make sure that their current debts are manageable and plan carefully before making any further financial commitments."



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R3 The Insolvency Trade Body

R3 The Insolvency Trade Body

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