Finance issues rise

Posted on 18 Jan 2010 by The Manufacturer

The number of UK manufacturers adjudged to be experiencing financial turmoil rose from 5857 to 6111 last quarter, although the number of firms with ‘critical’ problems was down, according to insolvency experts Begbies Traynor.

Begbies Traynor’s Red Flag Alert monitors UK companies’ financial distress across all sectors. It rates firms with a court action or ‘average, poor, very poor, insolvent or out of date’ accounts as having ‘significant problems’. Companies with ‘critical problems’ are those with County Court Judgements totalling £5,000 or more or those who have been issued winding up orders.

While the number of manufacturers with ‘significant’ problems rose by five per cent from 5,615 to 5,885 – roughly in line with all companies, disregarding sector – those with ‘critical’ issues fell to 226 from 242. And manufacturing firms collectively are more stable now than they were a year ago. There were 18 per cent less manufacturers rated as ‘critical’ in q4 2009 than in the same period the year before and 16 per cent less with problems rated as ‘significant’.

As a whole UK companies, in financial turmoil rose by six per cent last quarter to a total of over 140,000 firms. That figure is 14 per cent down on the same period in 2008. There are 4,040 firms with ‘critical’ financial problems and 137,487 with ‘significant problems’.

“Government support measures are providing welcome relief to the UK’s struggling companies in the short term but they may exacerbate problems for some businesses as the need to repay debt catches up with them later in the year,” said Ric Traynor, executive chairman of Begbies Traynor Group.

“Experience of the last four recessions tells us that unemployment levels and corporate and personal insolvencies have lagged behind technical recession by one to two years. With tax and interest rates certain to rise, as well as increasing pressure on consumer spending, there is every reason to suggest that the insolvency peaks of this recession remain some way off.

“While business finance is expected to become more readily available during the first half of 2010, we anticipate a rise in the levels of financial distress during the second half of 2010, as temporary financial support measures are unwound.”

The worst region for businesses’ financial insecurity is Scotland, followed by the West Midlands.