Critical finances dog 140,000 UK firms

by Gill Montia

Story link: Critical finances dog 140,000 UK firms

Begbies Traynor is warning that over 140,000 UK companies experienced “Significant and Critical” financial problems in the final quarter of 2009.

The level of distress showed a 6% rise on the previous three months but had declined 14% on the same period in 2008.

The recovery and restructuring specialist has also identified a new trend whereby business failures are occurring at an earlier stage of deterioration than in previous recessions.

It urges “a more lenient approach amongst creditors” and forecasts a significant rise in company failures (most probably from Q3 2010 onwards), taking into account the ending of HM Revenue & Customs’ “time-to-pay” scheme.

In the last three months, the automotive sector saw the largest quarter-on-quarter increase in Critical actions (up 26% on Q3 2009).

The service sectors suffered more than the non-service sectors, with a 22% increase in Significant and Critical actions in Q4 2009 compared to Q3 2009.

However, the retail sector saw a significant improvement with a 32% decline in Critical actions, compared to Q3 2009.

Begbies Traynor executive chairman, Ric Traynor, comments: “Experience of the last four recessions tells us that unemployment levels and corporate and personal insolvencies have lagged behind technical recession by one to two years.”

He adds: “With tax and interest rates certain to rise, as well as increasing pressure on consumer spending, there is every reason to suggest that the insolvency peaks of this recession remain some way off.”