More than 100,000 companies facing financial distress

The most recent Red Flag Alert report from insolvency group Begbies Traynor has shown that there are more than 100,000 British companies currently experiencing financial distress.

The collective debt of these companies is thought to be in the range of £58 billion. Around 50,000 companies are also preparing to face further financial hardships caused by the government's comprehensive spending review next week.

Begbies Traynor executive chairman, Ric Traynor, said, "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."

He said that business services - including IT, recruitment and advertising - would be among the worst sectors hit by the spending reform, along with the construction industry.

Traynor explained, "With confidence in the construction sector falling to an 18-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."

He also added that creditors, such as HMRC, are taking a firmer stance on collecting debts, with HMRC wind-up petitions rising by 39 per cent between August and September.

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