50,000 firms at risk from spending review

13th Oct 2010 07:54

More than 50,000 firms could be at risk from the government's spending plans according to the latest study by insolvency group Begbies Traynor.The group's latest Red Flag Alert, which looks for early signs of companies in troubles, highlighted 50,299 already experiencing financial distress in construction, IT, recruitment, advertising and business services, all sectors likely to be directly affected by government cutbacks.The numbers are 4% better than the previous three months figure of 51,711, but the improvement is slowing rapidly Begbies said. The second quarter had seen a 20% reduction over the first three months of 2010. The slowdown in the rate of recovery has been found across the board, chairman Ric Traynor said."Overall, although the number of companies experiencing distress has fallen by 10% compared to 137,268 in Q3 2009, the rate of recovery is the slowest for five quarters and compares to a 31% decline in distress in Q2 2010 versus Q2 2009," he said.The report found that 123,361 companies experienced 'significant' or 'critical' financial distress in the last three months, with those experiencing 'critical' financial problems owing over £57.5bn to creditors, suppliers and service providers."It will not be until the Government's Comprehensive Spending Review in a week's time that we will know for certain the allocation of all of the anticipated £83bn of spending cuts. However, our Red Flag Alert statistics show that the sectors most likely to be most impacted are already starting to shows definite signs of financial distress," Traynor added.