Suppliers seek to recoup recession debt

28 April 2010

28 April 2010 | Lindsay Clark

Suppliers could be owed a significant proportion of the £55 billion debt run up by distressed businesses in the UK, according to business restructuring firm Begbies Traynor.

More than 160,000 companies are experiencing “significant” or “critical” financial distress, the firm found. Between them they owe more than £55 billion to creditors, suppliers and service providers.

Ric Traynor, executive chairman of Begbies Traynor Group, said these debt levels presented a real threat to a sustained economic recovery.

“Faced with these risks, and a growing need to bolster their own funding for the recovery phase, trade creditors are increasingly seizing the opportunity to take action against their debtors to raise much needed working capital. This shift in behaviour heralds a new phase in the cycle, putting businesses experiencing financial problems at greater risk of failure.”

The sectors worst affected in the first quarter of 2010 include construction, in which companies experiencing significant or critical financial problems were up 30 per cent on the previous quarter; professional services (up 19 per cent); property services (up 42 per cent); recruitment (up 18 per cent); and retail (up 19 per cent). Sharp rises in input costs coupled with one of the worst winters for decades combined to make this a particularly difficult period across a number of sectors.

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