Rise in companies on the critical list in UK
21-07-2008
The number of companies with ‘critical problems’ increased by almost 700 per cent in the second quarter, up significantly from the same period last year.
Corporate restructuring specialist Bebgies Traynor revealed the figures in its quarterly Red Flag report. It found that 4,258 companies faced critical problems, which it defines as CCJs totalling over £5,000 or winding-up petition- related actions. Last year only 542 companies had the same problems.
The figures have also risen 28 per cent from the first quarter. Sectors struggling the most include construction (up 370 per cent on Q2 2007); IT (up 371 per cent) and retail (up 335 per cent). However, the manufacturing, automotive and wholesale sectors saw improvements on last year.
Ric Traynor, executive chairman of Begbies Traynor, said: "With credit conditions tightening, these new figures demonstrate that the effects are certainly getting worse, and we would anticipate that they will continue to do so, certainly until the end of this year."
He added: "In times of economic slowdown, you would expect the construction and retail sectors to suffer. However, the statistics also show that the gloom is certainly not restricted to those areas. Credit lines have dried up and companies which might have been supported by extended credit up to a year ago are now at real risk."
Based on previous research, around 15 per cent of the companies experiencing critical problems will enter an insolvency procedure in the next 12 months.
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