Financially Distressed Firms More Than GBP55bn In Debt

Wed, 28 Apr 2010

The level of debt held by UK businesses has risen to more than £55 billion, according to new research.

The latest Red Flag report from insolvency specialists Begbies Traynor has revealed that the number of businesses experiencing "significant" or "critical" financial distress increased for the second successive quarter last month, rising by 14 per cent from the final three months of 2009 to 161,601 during the first quarter of 2010.

The report said that between them they are thought to owe in excess of £55 billion to banks and trade suppliers.

Begbies warned that such businesses could go bust and default on the money they owe, creating a "ripple effect" that may threaten "a sustained economic recovery".

According to its Red Flag update, which monitors the warning signs of companies in distress, the latest increase in the number of troubled businesses was largely due to a shift in trade creditor behaviour combined with the slow growth in the economy.

It revealed a sharp rise in the number of creditors demanding payment and taking legal action against debtors.

It also showed that property services and construction firms were the worst hit sectors during the first quarter, with the number of distressed companies rising 42 per cent and 30 per cent respectively from the fourth quarter of 2009.

Begbies said insolvencies could hit record levels this year if government support measures are withdrawn after the election.
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