Companies of all sizes are being warned to watch out for early warning signs after a reported 85% rise in the number of businesses verging on insolvency.
During the third quarter of 2006, the number of UK companies facing serious trading problems was running at a monthly average of 4282, compared to 2315 for the same quarter of 2005.
The number of companies with significant, but not critical, financial problems rose by 18.8% over the same period.
The figures were released by Red Flag Alert, which monitors the financial status of companies based on a number of factors including balance sheets, debts, turnover and company assets.
September 2006 alone saw a 95% increase in the number of businesses verging on insolvency in comparison to the same month in 2005.
Although the rise covers companies across all sectors, there were considerable regional variations to the figures.
The midlands recorded a 223% increase of businesses in a critical financial state, whereas companies in greater London are healthier, recording only a 20% increase compared to last year’s third quarter.
“This is indeed a worrying rise, and should not be taken lightly,” said Mark Fry, south-east managing partner of Bregbies Traynor, who manage Red Flag Alert.
“We would expect a substantial percentage of these companies to go under, especially ones that continue to ignore the obvious danger signs such as shortage of working capital.”
© Crimson Business Ltd. 2006
