Business
Q1 2010 Red Flag Statistics
Q1 2010 Red Flag Statistics.
About this update from Btg Consulting Plc
[{"type":"text","content":"\n RNS Number : 8224K Begbies Traynor Group PLC 27 April 2010 \n \n\n \n \nDistressed UK businesses have £55bn of liabilities at risk of default, warns Begbies Traynor\n \nThe latest economic data indicates that the UK economy appears to have turned the corner but the recovery remains fragile, with over 160,000 companies experiencing 'significant' or 'critical' financial distress. Between them they owe over £55bn to creditors, suppliers and service providers, according to figures released today by Begbies Traynor, the leading business rescue, recovery and restructuring specialist.\n \nIn its latest Red Flag update, which monitors the warning signs of companies in distress, the number of companies experiencing significant or critical financial problems has risen by 20,074 or 14% to 161,601 in the first quarter of 2010 (Q4 2009: 141,527). \n \nWe estimate that approximately 7% of the increase is the result of a shift in trade creditor behaviour, with an increase in court actions evidence of their growing willingness to take action against their debtors. The remainder of the increase could be attributed to the normal seasonal uplift. \n \nRic Traynor, Executive Chairman of Begbies Traynor Group, said: \n \n\"While the economy appears to be showing positive signs of recovery, the magnitude of the liabilities still at risk of default represents a serious risk to creditors, indicating the potential far-reaching impact of these levels of distress. It is this ripple effect which represents a real threat to a sustained economic recovery.\n \n\"Faced with these risks, and a growing need to bolster their own funding for the recovery phase, trade creditors are increasingly seizing the opportunity to take action against their debtors in order to raise much needed working capital. This shift in behaviour heralds a new phase in the cycle, putting businesses experiencing financial problems at greater risk of failure.\"\n \nInterest rates will also have a role to play, with the latest Reuters poll of over 50 financial institutions predicting a rise of 1% over the next twelve months, thereby tripling current base rate, with some banks forecasting a rise of as much as 1.5%. \n \nTraynor added: \"Low interest rates have been one of the principal reasons why busine...