Insider Media Limited

Business recovery specialists are expecting a second wave of insolvencies and administrations in the Midlands market next year. At a round table discussion hosted by Insider in Birmingham, the consensus among the turnaround experts seemed to be that the bad news is not yet behind us.

Brendan McGeever, a corporate restructuring partner at legal firm HBJ Gateley Wareing in Birmingham, said: “The winners and losers still haven’t been sorted out in this recession. I don’t think that will happen until next spring because there is refinancing to come and there are working capital issues around the corner. The banks are predicting that their business recovery teams will be a lot busier in the SME markets next year.”

James Grenfell, senior partner at turnaround firm Orbis Partners, said it is a very quiet corporate recovery market at the moment.

He added: “This is partly because the banks aren’t dumping their assets on the marketplace. It’s also because of the government’s time to pay initiative.”

But he does not see that continuing next year. “There’s going to be a squeeze on cash and liquidity to refinance debt. We see there being more insolvencies and administrations over the next 12 to 18 months,” he said.

John Whitfield, managing partner in the Birmingham office of business recovery specialist MCR, agreed. “I think we will see more CVAs (company voluntary arrangements) going forward and also more insolvencies because the balance hasn’t been right in terms of the impact of the recession and the level of insolvencies,” he said.

“We’ve seen an upswing in the number of construction insolvencies, including the high profile ones such as Connaught and Rok.”

Those taking part in the round table suggested businesses are still reluctant to take advice which could help them to survive.

Phil Matchell, UK director, executive interim at recruitment firm Michael Page, said: “We speak to a lot of chairmen and CEOs and they are pretty headstrong types. They will just not sit and listen to third party advice. It’s not a good time to be headstrong.”

A recent survey conducted by insolvency body R3 showed that almost a third (29 per cent) of insolvency experts think a squeeze of the Time To Pay facility could be the biggest threat to vulnerable Midlands businesses in 2011.

R3 Midlands chairman Matthew Hammond, a partner at PwC in the Midlands, said: “Our members have seen how invaluable the Time To Pay scheme has been to businesses. We believe that it is important that it remains available as a breathing space for viable organisations and that it is not used as an alternative credit facility for companies needing constant bailouts in order to operate.”

The survey also revealed that almost half of R3’s members (48 per cent) believe the construction industry will bear the brunt of the impending public sector cuts, with a considerable reduction in spending on education and social housing.