Could eurozone collapse put you at risk of corporate insolvency?

Published on November 7, 2014 by Crawfords Accounting

Increasingly in recent weeks, some domestic UK sectors have seen their threat of corporate insolvency elevated not by poor performance within Britain, but the subdued economy on the continent.

Domestic demand is rising, but export markets are down, and for those with international operations, the fact that the former has so far compensated for the latter may come as cold comfort for long-term sustainability.

But it could get worse before it gets better – and a PricewaterhouseCoopers survey has revealed widespread concern about the stability of the eurozone itself.

The newly published study found only 30% of respondents think the eurozone will remain unchanged by the current economic turbulence in Europe.

Nearly a fifth (19%) actually expect total collapse, 25% foresee a ‘two tier’ system with fewer countries involved, and 14% think at least one country will leave the currency union completely.

Yet more than half have no plans in place to deal with such disruption over the long term, or with ‘contagion’ from other sectors.

Colin Brereton, lead partner for economic crisis response at PwC, said: “All businesses need robust and up-to-date contingency plans to cope with the increasing number of potential scenarios.

“In this context, our findings reveal a real and pressing need for structured planning processes to be put in place and tested against the possible eventualities.

For those in the UK with strong export books – particularly if those order numbers and values are weakening – it’s a timely reminder of the continental threat of corporate insolvency, and the need to be prepared for economic contagion from the eurozone.

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