Distressed property firms up 30%

The number of companies facing critical levels of financial distress rose by 24% in the final three months of last year, with property among the hardest hit. According to Begbies Traynor’s latest Red Flag Alert property services companies reported a 30% increase in critical levels of financial distress in the fourth quarter, the second largest increase across the sectors the firm tracks. The largest increase was seen in the travel and tourism industry, which posted a 56% increase. In the construction sector, the number of firms in financial distress increased by 13% during the period. Begbies said that after a relatively soft period for business failure in 2011 compared with previous recessions, firms across key sectors now looked set to face their toughest times so far as the UK economy looks likely to face increased business distress in the coming quarters. Executive chairman Ric Traynors said: “Trends evident in the Red Flag Alert demonstrate that we are likely to be approaching a crucial period for businesses large and small. Escalating levels of distress indicate we may be getting close to the bottom of the economic cycle, where so called 'zombie" businesses, which are inherently insolvent, but have benefited from extensive support measures such as HMRC's 'Time to Pay' scheme eventually fail.”