UK firms in financial distress up 15%

| April 13, 2011 | 0 Comments
UK firms in financial distress up 15%

In its latest Red Flag Alert, Begbies Traynor reports a 15% increase in financial distress across all UK business sectors, with sectors dependent on discretionary spending suffering “particularly badly”.

The recovery specialist’s survey for the first quarter of 2011 reveals that 186,554 firms are experiencing “significant” or “critical” financial problems, compared with 161,601 in the same period of 2010.

The figure is also up 26% compared with the previous quarter and while financial distress typically increases in the first three months of the year, the jump is materially above the 14% rise seen between the fourth quarter of 2009 and the beginning of 2010.

While there was an overall improvement in sectors less dependent on discretionary spending, this was offset by a 68% year-on-year rise in the number of businesses showing signs of distress in the bar & restaurant sector, a 60% jump in the leisure & culture sector, and a 23% increase in the sports and recreation sector.

The findings also expose a “rising tide” of professional services firms facing significant or critical problems, with first-quarter numbers up 61% compared with a year earlier, to over 15,000.

Begbies Traynor executive chairman, Ric Traynor, comments: “High levels of legal actions taken against debtors indicate that creditors are attempting to maximise cash collection right across their customer base.”

He adds: “The hike in oil prices and January’s VAT increase has made cash flow and credit control essential priorities for most businesses with some seeking payments through the courts.”

Tags: Begbies Traynor, financial distress

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