Insolvency specialist Begbies Traynor is reporting a 24% increase in the number of companies facing “critical” levels of financial distress in the fourth quarter of 2011 compared to the same period in 2010.
Many key sectors of the economy faced significant rises in critical financial distress, including:
Automotive – 14% increase
Construction 13% distress
General retailing 13%increase
Professional services 61%increase
Travel and tourism 56% i9ncrease
Of particular interest to landlord insurance clients will be the result for “Property Services” where a 30% increase in critical financial distress was found.
Even the South East of England is not immune to the general malaise. The Red Flag Alert shows that there was a 33% year on year increase in critical distress in this area of the country. In London the figure was 19%.
Few will be surprised to see that the retail sector fared so badly. Small/medium sized retailers were hit particularly hard. Landlords of small shops are often between a rock and a hard place. If the tenant defaults and moves out the landlord normally has to pick up the business rates. This means that for many landlords it is better to charge no rent as long as the tenant will pay the rates.
Begbies Traynor is a rescue, recovery and restructuring specialist. They publish their Red Flag Alert each quarter to provide a benchmark of “company distress”.