Begbies Traynor: UK economy not out of the woods yet

THE UK IS NOT completely out of the woods yet in regards to a recovery, warns insolvency specialists Begbies Traynor.

The insolvency firm’s latest Red Flag Report showed that although retailers in critical financial difficulty for Q4 2013 had decreased 7% compared to the previous quarter, it increased on the same period a year ago.

In the fourth quarter of 2013, 153 companies were in critical financial difficulty compared to 132 for the same period in 2012. 

The same can be said for the hotels sector, which had 26 companies in critical financial problems in the fourth quarter of 2013 compared to just 19 for the same period in 2012. However this figures is 24% less in Q4 2013 compared to Q3 2013.

Julie Palmer (pictured), partner at Begbies Traynor, said: “When compared to Q4 2012, levels of ‘critical’ distress among general retailers were actually 16% higher this year, as physical retail volumes struggled to keep pace with last year’s excessive spending1 resulting in heavy discounting across the high street.”

However, the services sector fared better. Financial services saw critical distress levels reduce 23% in the fourth quarter compared to the previous quarter, which was also a drop to 59 entities that were in critical distress down from 75 for the fourth quarter in 2012.

There was also a decline of 21% for professional services in the fourth quarter compared to the previous quarter, which saw critically distressed entities drop to 68 in Q4 2013 from 77 in Q4 2012. Finally, the support services sector also showed a decline of 4% in Q4 2013 compared to Q3 2013, as well as a reduction to 161 in the last quarter of 2013 compared to the 181 from the same quarter in 2012.

Of the 2.68m companies actively trading in the UK, about 518,000 were incorporated during 2013 (nearly 20% of the total). When compared to the approximately 352,300 which were incorporated in 2012 (13% of the total), this highlights a growing influx of entrepreneurial start-ups during the past 12 months, as well as improved business confidence.

“While this emerging trend is good news for UK innovation and competition… it is notoriously difficult for young companies with limited trading history to secure credit to support the next stage of their development, as financial institutions prefer to lend to businesses with a proven track record,” warned Palmer.

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