How distressed are UK businesses
How distressed are UK businesses?
With the UK economic downturn having arguably bottomed out, few would dispute that the ‘recovery’ remains fragile. In the first quarter of 2010 over 160,000 companies are experiencing significant or critical financial distress, owing over £55 billion to creditors, suppliers and service providers. Alarmingly, this figure rose from around 140,000 in the previous quarter.
Subscribers to the Business Sale Report can read more about what is causing this rise and how companies are trying to address it.
And how is this influenced by the creditors themselves? It is estimated that seven percent of this increase is due to a shift in creditor behaviour, with many having to press debters harder in order to keep up their working-capital. People are looking closely at the interest rate, with any further upward movements likely to put many more struggling businesses at risk – particularly in the crucial but embattled SME sector. Industries including construction, property services and recruitment are feeling financial distress particularly harshly. In terms of British regions, Scotland is again seeing some of the worst quarter-on-quarter levels of distressed businesses, with the number of companies experiencing notable or perilous difficulties up 18 per cent on the previous quarter to 10,377.
Subscribers to the Business Sale Report can view the breakdown by region of businesses in distress.
Looking at distressed businesses particularly as a micro-economic indictor does not provide a complete summary, however. The rate businesses subject to formal insolvency procedures has fallen dramatically over the course of the last twelve months. In the first quarter of 2010, there were a total of 783 businesses put into administration for England and Wales, compared with 1,311 in the same period last year.
Figures for liquidation – available in the full Business Sale Report – also show a decrease, and when taken in a broad view with the insolvency figures, show that it is perhaps even it is more of a last resort option than before.
Whatever the economic environment, there will be plenty of opportunities for entrepreneurs to buy up struggling businesses. In last month’s issue, we published a piece on how to buy a failing business. If you haven’t read it then please log in or call us for a back copy on 020 8875 0200.