Sussex: Companies under threat in downturn
Begbies Traynor, the UK’s leading business rescue, recovery and restructuring specialist, today revealed that the number of companies in Sussex under threat in the current economic downturn rose sharply in the third quarter of 2008.
According to the company’s Red Flag Alert Statistics, in July the number of companies with significant problems stood at 1,255. By August, this figure had climbed to 1,549. In September it rose dramatically to 2,034. This brings the total number of companies affected in this three-month period to 4,838. "Significant" refers to those with a court action and/or average, poor, very poor or insolvent or outdated accounts.
Companies with "critical" problems dropped from 32 in July to 26 in August, but climbed again to 39 in September. This brings the total number of companies affected in this three-month period to 87. "Critical" refers to those with County Court judgements totalling over £5,000 or Winding-Up Petition related actions.
Four of the clearly defined sectors to lead with significant problems are construction at 12%, property services at 10% and both retail and professional services at 7%. Regarding critical problems, construction is at 15%, retail at 13% and both manufacturing and property services at 10%.
At a national level, the number of distressed UK businesses has more than doubled since the start of the year, according to Begbies Traynor’s Red Flag A!ert Statistics. A staggering 4,566 companies faced critical problems in the third quarter of 2008 compared with only 791 in the same period last year. Additionally, the number of companies with significant problems has nearly doubled from January to the end of September, to 58,564.
Geoff Rhodes, partner at Begbies Traynor’s Brighton office, commented: “Our latest Red Flag A!ert Statistics reveal that September was the worst month yet for UK businesses and certainly the impact locally follows the trends we’ve seen growing over the last six months, with construction and property-related business bearing the brunt.
“Red Flat A!ert measures corporate distress signals for incorporated companies that have been trading for over a year and with assets in excess of £10,000 and certainly our experience on the ground reinforces that the impact on unincorporated businesses is following the same pattern.
“We expect to see an even further increase in “critical” business problems as distress escalates over the next year. We would encourage all businesses to protect themselves from the downturn by managing their exposure to risk, investing in customer retention strategies, controlling their costs and cash flows and improving their internal business processes where possible.
“While this may seem to be stating the obvious, we often find that businesses fail to focus on these basic principles early enough or, in some cases, at all. Today, more than ever, cash is vital, so cash generation and conservation should be top priorities.
“In difficult times, it is important to keep onside all those who have an interest in the business continuing successfully, including banks, customers, creditors, employees and professional advisers. Businesses should keep everyone regularly informed rather than saving up bad news, which can cause panic and irrational action.”
