Almost 100,000 UK businesses are in financial distress as major public spending cuts begins to bite, a new survey has found.
Rescue and recovery specialists Begbies Traynor’s quarterly Red Flag Alert Survey found that just under 6,000 Scottish companies are facing serious financial difficulties.
The survey categorises ailing firms as having significant or critical problems based on debt default and the state of their accounts. The more serious category indicates a firm which has court judgments or wind-up petitions against it.
A total of 382 Scottish companies fell into that category in the final quarter of last year a 17% increase on the figure of 330 recorded in the previous three-month period.
A total of 5,916 Scottish businesses fell within the two distress linked categories a fall of 9% on the 2010 result but those said to be in a critical state rose 16% year on year.
Firms offering business support services were the hardest hit and accounted for 24% of the total instances of commercial distress. The continuing problems in the construction sector were also evident in the findings with a distress rate of 12% unchanged from the previous quarter.
Ken Pattullo, group managing partner in Scotland for Begbies Traynor, said it had been a hard time for the business community and the outlook remained bleak in the short to medium term.
He said: ”We had expected the impact of public sector cuts in Scotland to lag behind the rest of the UK due to the timings of the respective elections, but we now appear to be feeling the knock-on effect through the wider Scottish economy, and we could continue to see this through the next two or three quarters.
”This rise in Scotland coincides with a general spread in distress across numerous sectors and regions of the UK economy that suggests the effects of the recession have now reached every corner of the UK.
”Even London that is usually insulated from distress has seen levels rise significantly, and every industry sector from manufacturing to professional services has now been affected over the course of the past three years,” he said.
”Just about every sector has now felt the effects of the recession and the squeeze on the economy. We are now seeing critical distress instances from firms that have managed to stagger along through two tough trading years but who still face problems raising finance and getting paid by debtors at a time when many have shrinking order books, a fatal combination for many businesses.”