Domino Effect Hits One in Four Businesses
- One in four UK companies have experienced financial impact from another’s insolvency
- Insolvencies increased by 13% following high-profile cases like Carillion and Toys R Us
- Medium-sized firms were worst affected with 38% reporting negative impact
- 11% of firms reported no material impact, 47% had no insolvency in suppliers/customers in past year
- R3 calls for more flexible tools like the proposed business rescue ‘moratorium’ to help companies at risk
A recent study by R3 reveals that 26% of UK companies have faced financial consequences due to the insolvency of a customer, supplier, or debtor in the past six months. The research highlights the ‘domino effect’ where one company’s insolvency increases the risk for others, particularly medium-sized firms. Following high-profile cases like Carillion and Toys R Us, underlying insolvencies rose by 13% in Q1 2018. R3 suggests that a more flexible tool like the proposed business rescue ‘moratorium’ could help companies cope with such shocks.
Factuality Level: 8
Factuality Justification: The article provides accurate and objective information based on research from R3, a credible source, and presents data related to the impact of insolvencies on UK companies. It also includes expert commentary from Andrew Tate, a spokesman for R3, providing insight into the domino effect and potential solutions. The article is well-focused and relevant to its main topic.
Noise Level: 3
Noise Justification: The article provides relevant information about the impact of insolvencies on UK companies and highlights the domino effect caused by high-profile cases like Carillion’s liquidation. It also mentions the role of R3 in helping firms affected by such events. However, it could benefit from more analysis or discussion on potential solutions to mitigate these risks.
Financial Relevance: Yes
Financial Markets Impacted: The insolvency of certain companies impacts other businesses and their finances
Financial Rating Justification: This article discusses the financial impact of one company’s insolvency on others, specifically mentioning the ‘domino effect’ where a company’s insolvency increases the risk for others. It also mentions the impact on suppliers and service providers, which can affect their finances.
Presence Of Extreme Event: Yes
Nature Of Extreme Event: Financial Crisis
Impact Rating Of The Extreme Event: Moderate
Extreme Rating Justification: The financial crisis mentioned in the article is moderate due to its impact on companies’ finances and insolvency risk, but not causing major damage or long-term consequences.
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