Tory leader David Cameron has proposed a US-style law which would give businesses ‘breathing space’ to help prevent them going into liquidation.
Speaking at the CBI this morning, Cameron promised to consult on a version of the so-called ‘Chapter 11’ protection system, which gives businesses time to reorganise before going bankrupt.
This will “give good companies breathing space to allow them to rescue or restructure the business in the face of the credit crunch,” said Cameron.
“This change will ensure fewer good companies end up in liquidation - and fewer people lose their jobs through no fault of their own.”
“We want to make sure sound companies don't go into liquidation unnecessarily because we all know what liquidation normally means - closure.
“This isn't good for the companies, many of which are actually fundamentally sound, it isn't good for the banks, who lend these companies money, and it's not good for employees - who face being laid off,” he added.
The proposals came as the Bank of England revealed inflation jumped from 3.3% in May to 3.8% in June – the highest level in 11 years.
The announcement, made this morning, prompted experts to warn against an interest rate rise.
“Current high inflation seems consistent with rising rates, but we believe that an interest rate hike would tip the economy into recession,” said Hetal Mehta, senior economic advisor to the Ernst & Young ITEM Club.
© Crimson Business Ltd. 2008