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15,000 construction firms in financial 'distress'

14 Oct 10 Many construction companies are still deep in financial difficulty, according to research by business recovery specialist Begbies Traynor.

Many construction companies are still deep in financial difficulty, according to research by business recovery specialist Begbies Traynor.

Its Red Flag Alert, which monitors the early warning signs of companies in trouble, reported that 15,894 construction businesses were in ‘significant’ or ‘critical’ financial distress in the third quarter of 2010,

However, this is a fall of 7% on the 17,033 experiencing financial distress in the second quarter, and a drop of 12% on the 18,089 construction companies in difficulty during the same period in 2009.

Construction is the worst affected sector after business services. In total, Begbies Traynor found that 123,361 UK companies were experiencing significant or critical distress, and those with critical problems owe more than £57.5bn to creditors, suppliers and service providers.

The report said 50,299 of the companies experiencing financial distress are heavily dependent on the public sector.

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Ric Traynor, executive chairman of Begbies Traynor Group, said: “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.

“Confidence in the construction sector has fallen to an eighteen month low, and there is a growing risk that even if the wider UK avoids a double dip recession, public-sector dependent industries face higher levels of financial distress.”

The report also found a significant increase in the number of HMRC wind-up petitions – up 39% between August and September – showing that the government may be getting tougher on chasing taxes, Traynor added.

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