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Certain sectors see a rise in financially distressed firms

Certain sectors see a rise in financially distressed firms

It might come as no surprise to contractor accountants to hear that the latest Begbies Traynor Red Flag report shows a 61% increase the number of financially distressed firms in the professional services sector over the past 12 months.

15,526 firms were discovered to be experiencing significant financial difficulties in the first quarter of this year compared to 9,620 in the corresponding period of 2010.

One reason for this increase is the stale corporate deals and property market, according to Begbies Traynor executive chairman, Ric Traynor. He went on to point out that professional services firms operating with a high fixed cost base find it increasingly difficult to cope with the current market conditions as revenues have failed to recover and opportunities to further cut costs have become more limited.

It’s not only professional services firms that are struggling either. Bars and restaurants fared even worse, registering a 68% increase on the Red Flag report, whilst the amount of culture & leisure firms with significant financial problems rose by 60%.

Companies with critical financial problems that are considering insolvency will be distressed to learn that even that option is to cost more. The Insolvency Service has raised the cost of filing bankruptcy proceedings and starting compulsory liquidation.

As from the 1st of June, an individual who wants to file for bankruptcy will need to pay £525, an increase of £75, whilst the charge for a creditor petitioning for a bankruptcy order will need to pay £700 instead of the current £600. Companies entering into voluntary liquidation will need to pay £1,165, a rise of £165.

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Image: Closed by runran

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