'Firms may not survive the year'

2:05am Wednesday 9th July 2008

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HUNDREDS of struggling businesses in the region may not survive until the end of the year, financial professionals warned last night.

As the credit crunch continued to tighten its grip on the economy yesterday, insolvency experts from the North-East warned that businesses will suffer further in the coming months.

Andy Wood, regional chairman for the Association of Business Recovery Professionals in Yorkshire, said hundreds of companies in the North-East and North Yorkshire could fall victim to the credit crisis.

Nationally, there were 3,210 liquidations from January to March, which one expert has predicted could rise by as much as eight per cent in the second quarter of the year.

However, James Ramsbotham, chief executive of the North-East Chamber of Commerce (NECC), predicted a medium to long-term recovery for housebuilders, saying: "Once things start to turn, and demand again outstrips supply, housebuilders will be in the driving seat again."

As he spoke, York-based Persimmon became the latest builder to announce redundancies, saying it had axed 1,100 jobs since the beginning of the year.

Mr Wood said insolvency experts were busier now than at any time in the past decade.

"We have a steady stream of businesses wanting advice about what they can do - pubs and restaurants are being badly hit, as are developers. Many of these bought a plot of land to develop for their pension fund," he said.

"Unfortunately, a large number will not survive the end of the year."

Eamonn Wall, director of Robson Scott Associates, in Darlington, said the situation could get worse and said insolvencies could have risen by as much as eight per cent from April to June.

"There is presently a noted increase in the level of both personal and corporate business failures," he said.

"However, as the effects of the credit crunch are only starting to be felt now, we are expecting a further increase towards the end of the year, and lasting for the foreseeable future."

Mr Wall advised firms to contact an insolvency practitioner as soon as it started to face difficulties.

Persimmon described market conditions as "undoubtedly the most challenging period" in recent history.

The Home Builders' Federation said the industry was facing its worst downturn for 30 years.

Mr Ramsbotham said housebuilders were suffering a double blow of rising mortgages forcing buyers out of the market and falling house prices.

"At this point, the worry will be under-supply, rather than demand, as production will have slowed to such an extent that it will take time to crank back up again," he said.

"Buying a house is a long-term investment in the future, not a short-term fix. Short-term price variations can be expected with all investments. Threats always bring opportunities and it looks to me that the time is nearing when opportunities to purchase a new home will be favourable for those who can take them."