More firms are struggling say Begbies

NEW data shows the number of UK firms struggling to stay in business jumped by 20% in the last three months of 2010.

According to the Red Flag Alert report by the accountancy firm Begbies Traynor nearly 148,000 companies had insolvent accounts, a court action against them or a winding-up petition, up from 123,361 in the third quarter.

The number of distressed businesses was up 4% on the same period in 2009. Begbies expects this growth to translate into more insolvencies this year as creditors take a tougher stance and Government spending reduces.

Those companies described as “critical” by Begbies – issued either county court judgments or facing winding-up petitions, owed creditors more than £52.7bn. And there was a 24% increase in distress at firms reliant on public contracts.

But on a year-on-year basis Manchester, Liverpool and Preston all saw fewer distressed firms. The number of businesses facing winding up petitions in Manchester and Liverpool fell 28% to 74 and 47 respectively. Preston recorded a 28% fall to 16.

There was also a decline in the number of firms with “significant” problems – insolvent or out of date accounts – in all three cities. Manchester was down 11% to 2,644, Preston down 19% to 680 and Liverpool was static at 1,228. In all cases the construction sector accounted for largest proportion of firms in trouble.

John Fairbrother, partner at Begbies Traynor in Liverpool, said: “The number of companies facing critical problems in Liverpool has significantly decreased compared to this time last year, which is encouraging for the business community.

“However, Liverpool’s construction industry – which has relied on public sector projects to keep it afloat during the recession – has taken a further blow this quarter, with construction businesses accounting for almost one third of the companies facing critical problems.

“SMEs are also under the microscope as creditors crack the whip and demand payment of debts. The next quarter will be crucial for the city’s SMEs; they must ensure that they proactively manage any financial difficulties as soon as they arise with the help of a bank or a restructuring expert.”