Companies With "Critical Problems" Increase Almost 700 Per Cent

Business Health Statistics

| July 23rd 2008

More News by Ric Traynor

Date Published: 23rd July 2008

Worsening economic climate results in seven times as many companies experiencing “Critical Problems” in Q2 2008 compared to Q2 2007 

Over 4,200 companies experiencing critical problems in Q2 2008
Construction, IT and retail sectors suffering the most
Credit Crunch deepens with nearly 30 per cent increase in critical problems compared to Q1
Begbies Traynor, the UK’s leading business rescue, recovery and restructuring specialist, today reveals that the number of UK companies experiencing “Critical Problems” in the second quarter of 2008 has increased substantially over the same period in 2007. Staggeringly, 4,258 companies faced ‘critical’ problems (those with CCJs totalling over £5,000 or Winding-Up Petition related actions) in the second quarter of 2008 compared with 542 as in the same period last year, an overall increase of 685 per cent.

The research also shows that conditions are getting more difficult as the year progresses, with an increase in the number of companies facing critical problems of nearly 30 per cent (28.68 per cent) in Q2 2008 compared to Q1 2008.

Ric Traynor, Executive Chairman of Begbies Traynor Group, commented, "The last set of Red Flag A!ert Statistics showed the effects of the credit crunch were just beginning to be felt by UK businesses. With credit conditions still tightening, these new figures demonstrate that the effects are certainly getting worse, and we would anticipate that they will continue to do so, certainly until the end of this year at least."

Sector Highlights
The Q2 2008 Red Flag A!ert statistics show substantial year on year increases in ‘critical problems’ across all sectors, but Construction (up 370 per cent on Q2 2007), IT (up 371 per cent) and Retail (up 335 per cent) are among those areas suffering the most. On the positive side, the statistics show a fall in the rate of growth of appointments within the manufacturing, automotive and wholesale sectors in Q2 2008 compared to Q2 2007.

Analysis of the trends in the first half of the year shows Financial Services (Q2 up 36 per cent on Q1), Retail (up 23 per cent) and Property Services (up 20 per cent) as those suffering the most. Pressure did ease slightly in Q2 2008 in certain sectors, including engineering and automotive industries which, although the overall numbers were higher, the rate of increase had slowed in actions received over the first quarter of the year.

Breakdown of Sectors with Most Significant Changes in Critical Problems

Sector Co's with Critical Problems in Q2 2007 Co's with Critical Problems in Q2 2008 Change %
IT 24 113 371%
Construction 136 639 370%
Manufacturing 37 165 346%
Retail 46 200 335%
Print & Packaging 15 61 307%
Financial Services 16 64 300%
Transport & Comms 43 167 288%
Engineering 17 65 282%
Automotive 22 68 209%
Wholesale 41 116 183%

Ric Traynor added, "In times of economic slowdown, you would expect the Construction and Retail sectors to suffer – and that is certainly borne out by our research. However, the statistics also show that many other industry sectors are being affected by the current conditions, and the gloom is certainly not restricted to those areas. Credit lines have dried up and companies which might have been supported by extended credit up to a year ago are now at real risk."

The quarterly ‘Begbies Traynor Red Flag A!ert’ Statistics for the second quarter of 2008 monitors adverse actions and other corporate distress signals. Based on previous Begbies Traynor research, approximately 15 per cent of the companies experiencing the most difficult of circumstances, categorised by Red Flag as those with 'Critical Problems', will enter into a formal insolvency procedure within 12 months.

About the author

Ric Traynor

Executive Chairman

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Ric qualified with Arthur Andersen in 1984 and founded Begbies Traynor in 1989. Ric specialises in practice management and has considerable experience in financial turnaround and dispute resolution within professional practices.

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