140,000 companies "in severe financial distress"-Begbies Traynor

More than 140,000 companies "experienced significant and critical financial problems" in the fourth quarter of 2009, according to statistics from Begbies Traynor.

The figure for companies in "high levels of corporate distress" for Q4 2009 is 6 percent higher than the figure for Q3 2009, but 14 percent lower than Q4 2008, according to the firm's Red Flag report.

These statistics come "despite the positive effects of government fiscal stimulus" such as the VAT rate reduction, quantitative easing and the Business Payment Support Service, Begbies said.

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

"Experience of the last four recessions tells us that unemployment levels and corporate and personal insolvencies have lagged behind technical recession by 1 to 2 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."

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