2013-07-15 London
Fewer UK companies in financial distress
Some welcome financial news has increased the likelihood for a strong recovery in the UK economy. The second quarter of 2013 has seen a 40 per cent fall in companies in financial distress, raising hopes of a sustained economic recovery.
Restructuring specialist Begbies Traynor has reported a 39 per cent drop of businesses in a “critical” condition compared with the same period a year earlier, which is a strong indicator that the UK’s economy may be regaining strength.
Despite this positive news, warnings have been issued about the plight of so called zombie businesses, companies that have survived the recent economic crisis but which are severely underfunded and do not have the cash flow to make the most of the economic recovery. Chronically underfunded SME’s (small and medium enterprises) are at the greatest risk of failing during the recovery.
Overall, recent data shows that the UK services sector has made the strongest improvements, whilst the manufacturing sector has underperformed expectations. Soon to be published figures are likely to show that economic growth has risen to 0.6 per cent. Despite the warnings about ‘zombie businesses’, these figures show that although the economic upturn is fragile, it is slowly building the foundations for a lasting recovery.
