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Sun June 13 2021

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Hidden dangers of recovery

15 Jul 13 The number of construction firms deemed to be in ‘critical’ financial distress has halved in the past 12 months, according to a report out today.

The latest Red Flag Alert Report for Q2 2013, produce by insolvency specialist Begbies Traynor, says that the number of construction firms in ‘critical’ financial distress has fallen by 48% since Q2 2012.

Across all sectors, UK businesses experiencing 'Critical' financial problems reduced 39% from 4,947 in Q2 2012 to 3,001 in Q2 2013, indicating a significant turnaround in the health of the UK economy. On a quarterly basis, the improvement continued with levels of 'Critical' distress falling 9% from 3,283 in Q1 2013.

However, Begbies Traynor partner Julie Palmer warned that companies often run into difficulties during recovery. She said: "With critical distress levels falling at a record pace, this quarter's improvement appears to be the first real sign that the UK economy has turned a corner towards a sustained recovery. However we have real fears that many SMEs will have serious financial difficulties at the time they least expect – during a recovery. Our experience has shown time and time again that many SMEs run out of cash during the recovery phase, as there is a real temptation to overtrade.”

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