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Fewer businesses on the brink of going bust

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The number of businesses on the verge of going bust has declined at a record pace of 39% over the past year, it has emerged.

UK businesses classed as experiencing ‘critical’ financial distress reduced from 4,947 in the second quarter of last year to 3,001 this time around, indicating a significant turnaround in the health of the UK economy, according to restructuring company Begbies Traynor.

The figure is the second highest year-on-year drop for more than two years and also marked a 9% improvement on the first quarter of 2013.

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A turnaround in the regions outside of London, particularly the north of England, has helped drive the recovery.

“With critical distress levels falling at a record pace, this quarter’s improvement appears to be the first real sign that the UK economy has turned a corner towards a sustained recovery,” declared Julie Palmer, partner at Begbies Traynor.

However, while the data paints an improving economic picture, it isn’t all good news for customers of the catering equipment industry.

Begbies Traynor said that the “poor” performance of bars and restaurants in the second quarter was one of the most surprising trends to emerge from the report.

The sector has seen a marked downturn following a much stronger first three months of this year, when it recorded the largest decrease in financial distress of any industry surveyed.

Businesses in the bar and restaurant sector are 2.5 times more likely to have adverse creditor actions against them than the average for companies across all sectors, which Begbies Traynor said may go some way to explaining the fragility of this group.

It also noted that one cloud hanging over the head of the wider business market is the prospect of SMEs getting into financial difficulties during the recovery due to a temptation to overtrade.

Many companies which have survived the worst of the recession will now be chronically under-funded and in desperate need of finance, the company warned.

Tags : administrationbarsbusinesscatering equipmentinsolvencyrestaurants
Andrew Seymour

The author Andrew Seymour

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