Q1 2011 Red Flag Alert Report

RNS Number : 7624E

Begbies Traynor Group PLC

13 April 2011

 



Q1 2011 Red Flag Alert Report

15% Increase in Financial Distress Across All Business Sectors

Sectors dependent on discretionary spending suffer particularly badly

Key findings from the Q1 2011 Red Flag Alert Report:

·     186,554 UK businesses are experiencing 'significant' or 'critical' financial problems compared with 161,601 in Q1 2010

·     A 15% year on year increase when compared to Q1 2010

·     A 26% increase in  financial distress compared to Q4 2010 - although financial distress typically increases in Q1, this increase is materially above the 14% increase between Q4 2009 and Q1 2010

·     Overall improvement in selected sectors, less dependent on discretionary spending - such as Food and Beverage Manufacturing

·     Year on year, the number of businesses showing signs of distress is up by 68% in the Bar & Restaurant sector; by 60% in the Leisure & Culture sector; and by 23% in the Sports and Recreation sector

·     The numbers show a rising tide  of Professional Services firms facing significant or critical problems - this has risen by 61% compared with Q1 2010

Red Flag Alert, which monitors a series of indicators of company distress, shows a 15% increase to 186,554 companies which experienced 'significant' or 'critical' financial distress in Q1 2011 compared to 161,601 companies in Q1 2010.

The total number of businesses facing 'critical' problems in Q1 2011 compared with Q1 2010 has increased by 11%. In particular it is the sectors which rely almost solely on consumer discretionary spending which are beginning to show the affects of anticipated job losses.

Compared with Q1 2010 the level of combined distress (Significant and Critical) in the Bar & Restaurant sector was up by 68%. Businesses in the Leisure & Culture sector were faced with a 60% rise from Q1 2010. Figures for the Sports & Recreation sector show a 23% rise from Q1 2010.

January 2011 marked the beginning of widespread 90-day consultations on job cuts resulting from October's Comprehensive Spending Review. A significant number of public sector staff will have received formal notification of impending redundancies which will have had an impact on discretionary consumer spending.

Ric Traynor, Executive Chairman of Begbies Traynor Group, said:

"The figures for Q1 2011 show the number of UK companies facing 'critical' problems has risen year on year with significant increases across the leisure sector in particular.

"Compared with our figures for food retail which show little change, it seems likely that a fall in consumer confidence and spending power driven by anticipated job losses lies at the core of the leisure sector's troubles.

"Another marked increase was evident in the professional services sector where the number of firms showing signs of distress was up by 61% compared with Q1 2010."

Traynor commented:

"Over 15,000 firms in the professional services sector are showing signs of significant or critical problems - partly driven by a stale property and corporate deals market - often the drivers for an active professional services community. Compared with the Q1 2010 figure of 9,620 it seems that firms which operate with a high fixed cost base are finding the current market conditions increasingly difficult as their revenues fail to recover and the scope for further cost reductions becomes more limited."

Traynor added:

"High levels of legal actions taken against debtors indicate that creditors are attempting to maximise cash collection right across their customer base. The hike in oil prices and January's VAT increase has made cash flow and credit control essential priorities for most businesses with some seeking payments through the courts."

ENDS

Q1 2011 Red Flag Alert Statistics

Combined 'Significant' and 'Critical' problems by Sector:

Sector	Q1 2010	Q1 2011	Percentage change	Q4 2010	Q1 2011	Percentage change
Automotive	4,178	3,296	-21%	3,826	3,296	-14%
Construction	22,990	25,031	9%	19,167	25,031	31%
Food & Beverage Manufacturing	894	502	-44%	860	502	-42%
Printing & Packaging	2,322	1,978	-15%	2,211	1,978	-11%
Other Manufacturing	8,057	6,559	-19%	7,747	6,559	-15%
Financial Services	3,037	3,658	20%	2,887	3,658	27%
Property Services	16,385	15,720	-4%	13,982	15,720	12%
Professional Services	9,620	15,526	61%	8,293	15,526	87%
Support Services	36,169	52,862	46%	36,430	52,862	45%
Media	4,209	3,598	-15%	3,854	3,598	-7%
Hotels & Accommodation	2,141	1,169	-45%	1,878	1,169	-38%
Bars & Restaurants	2,677	4,505	68%	2,347	4,505	92%
Sports & Recreation	1,606	1,977	23%	1,408	1,977	40%
Leisure & Culture	1,874	3,006	60%	1,644	3,006	83%
Travel & Tourism	2,141	1,893	-12%	1,878	1,893	1%
Food & Drugs Retailing	2,796	2,390	-15%	2,358	2,390	1%
General Retailing	9,360	7,897	-16%	7,893	7,897	0%
Wholesaling	6,236	5,664	-9%	6,520	5,664	-13%
Haulage & Logistics	2,997	2,358	-21%	2,672	2,358	-12%
Telecoms & IT	11,201	15,231	33%	10,587	14,926	41%
Utilities	538	400	31%	470	705	50%
Others	10,173	11,334	11%	8,924	11,334	27%
All Sectors	161,601	186,554	15%	147,836	186,554	26%

For further information please contact Twentyfour7 PR:

Bob Bion                                                              Christina Savage                                             

0161 212 7436                                                    0161 212 7435                                                   

[e-mail]                       [e-mail]        

About Begbies Traynor Red Flag Alert

Red Flag Alert measures corporate distress signals through a comprehensive and complex methodology, drawing on factual legal and financial data from a wide range of relevant sources for companies that have been trading for over a year.

The survey monitors the numbers of companies experiencing difficulties in two categories: "Significant Problems" and "Critical Problems".  

Companies with "Significant Problems" are those with either a court action and/or poor, very poor insolvent or out of date accounts.

Companies with "Critical Problems" are those with CCJs totalling £5,000 or more and/or Wind-Up Petition related actions.

Red Flag Alert is now commercially available to all businesses, on an annual subscription basis, to help them better understand risk and exposure and help prepare them for the future.  Further information about Red Flag Alert can be found at: www.redflagalert.com

From January 2011 Red Flag Alert recalibrated it's scoring criteria to improve the way it detects financial distress. As part of this change we have changed some of the sector and geographical score cards in response to customer feedback.

About Begbies Traynor Group

Begbies Traynor Group plc is a specialist professional services consultancy providing independent professional advice and solutions to businesses, financial institutions, the accountancy and legal professions and individuals in the areas of recovery, specialist taxation advice, corporate finance, investigations and risk management.  It is listed on AIM (Ticker: BEG).  Further information can be found at: www.begbies-traynorgroup.com

ENDS

 

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