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Business strain mounting

Companies: BEG ��
09/02/2007

Troubled times lie ahead for UK Plc, with many of its constituent businesses demonstrating signs of distress. Thus predicts insolvency expert Begbies Traynor, gleaning its conclusions from its Red Flag A!ert (sic) monitoring database.

The stark warning follows the recent shock spike in the base rate and accords with the latest insolvency statistics from Experian, showing a near-30 per cent rise in actual corporate failures in the fourth quarter of 2006 and an overall rise of almost 11 per cent for 2006 as a whole.

New quarterly figures mined from Red Flag revealed 2,491 UK companies were the subject of winding up petitions in 2006, a 23 per cent rise over 2005. Even more worryingly, the number of petitions in November and December was more than double the average rate for the previous ten months.

Further illumination can be gleaned from warning signs such as incidences of companies subject to court recovery actions and the filing of late accounts, which rose by ten per cent in 2006. On average, Red Flag logged 36,670 of these warning events per month last year.

‘After a long period of stable low rates and an expansion in the availability of external finance, the pressures on struggling UK businesses now seem to be mounting,’ commented Begbies’ chairman and founder Ric Traynor, who pointed to ‘an inexorable slide towards insolvency’ if issues faced by these businesses are not addressed ‘beyond simply borrowing more money and hoping for better times’.

Interestingly, the service sector experienced the most difficulties and had the largest number of companies with significant and critical problems. But despite these high figures, the service sector outlook actually improved, with a five per cent fall detected in the number of companies with critical difficulties.

The retail and construction sectors both suffered a rise of two per cent in the number of critically troubled ventures within their ranks, and London-based ventures performed slightly better than their business brethren elsewhere.


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