the business ladder

Latest research has shown that over 123,000 UK businesses, with combined debts of almost £58bn, are experiencing significant or critical financial problems.

The quarterly Red Flag Alert report from insolvency experts Begbies Traynor conducted the report which found that the companies in debt owe more than £57.5bn to creditors and service providers. In addition, 50,000 of the businesses identified would be likely to by hit by the latest government cuts.

The report comes as the Coalition government prepares to announce the results of the Comprehensive Spending Review, expected to reveal a number of spending cuts which will affect those businesses that depend on public sector spending.

Executive Chairman, Ric Traynor, of Begbies Traynor Group, said: “It will not be until the government’s Comprehensive Spending Review in a week’s time that we will know for certain the allocation of all of the anticipated £83 billion of spending cuts. 

“With confidence in the construction sector falling to an eighteen month low, recruitment activity at its slowest for almost a year and a strong increase in distress in the advertising sector, there is a growing risk that even if the wider UK avoids a double-dip recession, public-sector dependent industries face higher levels of financial distress.”

According to the Red Flag Alert report’s statistics, the sectors most likely to be most affected are already starting to shows signs of financial difficulties, with 50,299 companies in the areas of construction, Information Technology (IT), recruitment and advertising struggling.

Industries such as retail, leisure and travel are also expected to suffer financial problems and are predicted to see a setback in their recovery.

Mr Traynor added: “We believe that there will be a prolonged period of growth in business distress, as SMEs feel the full impact of the gradual unwinding of government support measures, combined with public sector spending cuts and deteriorating business and consumer confidence.”

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