Financial recovery in companies slows

More than 123,000 UK companies face serious financial distress, owing £58bn.

The latest statistics from
Red Flag Alert show a 10% fall in companies in distress
for Q3 2010 compared to a year earlier. However, the rate of recovery is the
slowest for five quarters and compares to a 31% decline in financial distress in
Q2 2010 compared to Q2 2009.

The taxman is toughening up its attitude to debtors. The figures show HM
Revenue & Customs’ winding up petitions up 39% between August and September.

“The decline in the numbers of businesses in distress reflects a combination
of lenient creditor attitudes and the effects of temporary government support
initiatives, including quantitative easing, the time to pay scheme and low
interest rates,” said executive chairman Ric Traynor.

“However, the marked slowdown in the rate of recovery points to the renewed
challenges facing UK corporates, as reflected by a recent significant weakening
in corporate confidence, and there is some early evidence that creditors such as
HMRC are adopting a harder line in collecting debts.”

Related reading