Troubled retailers still on the rise

A report focusing on Q2 2009, shows a 74 per cent increase year-on-year in the number of companies in financial distress.
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The report, Red Flag Alert, is a quarterly monitor of early warning signs of company distress by Begbies Traynor, a business rescue, recovery and restructuring specialist.

The report looks at companies with significant problems, who have either a court action and/or average, poor, very poor insolvent or out date accounts and companies with critical problems are those with CCJs totalling £5,000 or more and/or wind-up petition related actions.

Findings also showed quarter-on-quarter, there was a slow-down in the rate of growth of companies with critical problems with only a 17 per cent increase in the retail sector against Q1 2009.

Despite this, the number of companies with critical problems has risen by 91 per cent year-on-year and those with significant problems have risen by 74 per cent year-on-year.

The growth in the number of retailers demonstrating financial distress also slowed down with only ten per cent growth quarter-on-quarter.

Nick Hood, partner at Begbies Traynor, commented: “Although problems in the retail sector have slowed down quarter-on-quarter at both the critical and significant levels, prospects remain tough for the sector.

“Year-on-year we have seen massive increases in financial problems and retailers are facing continued pressures from the weakness of sterling which is forcing up costs inexorably at the worst possible time.

“The deluge of negative news on jobs continues to savage consumer confidence which will only be compounded by the planned increase in VAT at the end of the year.”

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