2,000 Preston businesses face financial hardship

A study by Begbies Traynor ahead of expected interest rate rises has found that 1,940 Preston-based companies are experiencing ‘significant’ levels of financial distress.

The Red Flag Alert research, which monitors the financial health of UK companies, says the figure is a 17 per cent increase on the same period last year.

Support service companies and construction firms had the highest volume of businesses in ‘significant’ financial distress, with 419 and 294 respectively experiencing difficulties over the past quarter.

Ian McCulloch, insolvency director at Begbies Traynor in Preston, said: “The number of firms experiencing ‘significant’ financial distress has reached unprecedented levels over the past 12 months as businesses in search of growth have overstretched themselves, taking too many risks after being lulled into a false sense of security by the continued low interest rate environment.

“With consumers continuing to borrow using credit cards, personal loans and car finance at a rate almost five times faster than their growth in earnings, my biggest concern is on the UK’s ever-expanding consumer credit bubble, which could burst at any minute, knocking the consumer industries and financial sector for six.

The Red Flag Alert data also revealed that 450,000 businesses across the UK were suffering from ‘significant’ financial distress, up 27 per cent compared with the same period last year.

“Regardless of whether interest rates rise or fall on Thursday, there is also a distinct trend emerging among personal services companies, who seem to be contributing more than their fair share of distress across multiple sectors of the economy. “Following HMRC’s crackdown on these businesses, many personal service companies are finding trading conditions particularly tough under the new regime. As a result, it is likely that we will see a trend of increasing insolvencies among this group, putting added pressure and costs on the larger companies and sectors that they serve.”

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