UK companies experiencing critical problems** during the first quarter of 2006 numbered 12,637, a leap of 41.5% compared to the corresponding quarter last year (Q1 2005: 8,930). This finding is based on new Red Flag A!ert research by corporate restructuring experts Begbies Traynor Group plc.
Compared to the last quarter of 2005, there was a 9.96% increase for critically troubled companies in the UK, rising from 11,492 in Q4 2005 to 12,637 during Q1 2006 (monthly average: 4,212).
Greater Manchester-based companies with critical problems witnessed the most dramatic increases. The Q1 2006 data shows that there was a surge of 88.2% compared with Q1 2005. During the first quarter of 2006, 149 Greater Manchester companies were on the critical list, up from 79 during Q1 2005.
UK companies with significant problems* increased by nearly 10% over twelve months to 124,900 during Q1 2006 (Q1 2005: 113,838). London companies with significant problems saw smaller growth, up just 2.8% to 19,426 (Q1 2005: 18,904).
Other Red Flag A!ert Findings
In Greater Manchester and across the UK, the service sector (excluding financial services) accounted for the most companies with both significant and critical problems in the first quarter of 2006.
Despite news of Peugeot closing its car plant in Coventry, manufacturing actually fared better than most other sectors across the UK in the Red Flag A!ert findings. Its share of significantly-troubled companies during Q1 2006 dropped 1% to 7% compared to Q1 2005, while critically-troubled manufacturers remained steady at 7%.
Retailers are still feeling the heat from a continued slump in high street sales. This sector accounted for 8% of all companies with critical problems during Q1 2006, up from 7% on Q1 2005. The share of retailers with significant problems rose to 8%, up 1% from the last quarter.
Financial services was the only other sector to experience a rise in its share of the total number of critically-troubled companies. During Q1 2006, it accounted for 4%, but during Q1 2005 it represented just 3%.
Paul Stanley, partner of Begbies Traynor, Manchester, commented:
“Being on the critical list doesn’t necessarily mean these companies are doomed to fail. Many companies can be turned around provided their directors take remedial action, and sooner not later. Sadly, it’s all too common with most companies that end up in Administration or Receivership for the directors’ inherent optimism to have made them behave a little naively and simply hoped that their problems would go away.”
For further information, please contact:
Paul Stanley Joanne Fletcher-Wall
Begbies Traynor Bell Pottinger North
0161 839 0900 01625 506425
Information on Begbies Traynor can be accessed via the Group’s website at
Notes to editors
About Red Flag A!ert
Red Flag A!ert uses a number of key factors to indicate businesses with financial problems that may lead to formal insolvency procedures (Administration or Receivership), or a desperate need for refinancing and restructuring.
* Among the criteria for firms with significant financial difficulties are sustained trading losses, weak balance sheets, mounting debts, declining turnover and the continued disposal of assets to enable the business to keep trading.
The early warning monitoring system also identifies companies with County Court Judgments (CCJs) against them and those that have filed their annual accounts late with Companies House. These characteristics, when allied with other signs of a troubled company, can indicate a business flirting with failure.
** Companies with critical financial problems are even closer to formal insolvency procedures than those with significant troubles. As well as displaying the signs of significant difficulties they also have petitions to wind up or striking off notices filed against them, both of which may force the company ultimately to cease trading.
About Begbies Traynor Group plc
The Group specialises in business insolvency management and is becoming increasingly active in the area of personal insolvency. It also offers services in corporate rescue and investigation services and has entered the field of corporate finance.
In November 2005, the Group entered the rapidly-expanding volume personal insolvency market via the acquisition of W3 Debt Solutions, a firm specialising in providing advice and practical support to individuals in debt.
The Group has grown to its current network of 30 nationwide offices ranging from Scotland to the South West of England, with 350 operatives. The Company continues to pursue its strategy of organic development, coupled with the acquisition of specialist knowledge of both individuals and firms, to further increase its market share in its core services.
The Directors believe that the Group is the UK's largest independent insolvency, corporate rescue and recovery specialist with clients ranging from major institutions to individuals with business difficulties.
The Office Network
The Group operates with 60 licensed insolvency appointment takers, some 225 fee earning staff and 65 in support and administration. The Group operates from 30 locations across the UK.
The core business of the Group is the formal administration of insolvencies including receiverships, liquidations, administrations, company voluntary arrangements and business-related personal insolvencies. The Group has extended its activities into a range of consultancy services including corporate rescue, credit management, forensic and investigation services and corporate finance.