600% increase in property services firms hit by ‘critical problems’

In its Red Flag Alert Statistics report unveiled yesterday the business rescue, recovery and restructuring specialist said that the continuing economic turmoil and housing downturn had badly hit the property services sector.

It said that the increase in property services companies displaying ‘critical problems’ such as winding petitions and ‘significant’ problems, including court action and/or average, poor, very poor or insolvent or out dated accounts, had increased by 67% alone in the third quarter of this year compared to the second quarter.

The report also showed that more than seven times as many UK companies were experiencing major problems this year compared to last year. It said a total of 4,566 UK companies faced ‘critical’ problems during the third quarter of 2008 compared with only 791 reporting the same problems in the 2007 third quarter.

Additionally, the number of companies with ‘significant’ problems has nearly doubled from January to the end of September 2008, to 58,564.

It said that in both cases, the September figures for companies in trouble are at their highest this year with companies on the ‘critical problems’ list increasing from 736 in January to 1798 in September – a rise of nearly 250%.

Nick Hood, partner at Begbies Traynor Group, said: ‘In the current climate, you’d expect the construction, property and retail sectors to suffer – and our research certainly corroborates that. However, the statistics also show the contagion has spread across many other industries.

'As further economic uncertainty lies ahead, we would encourage all businesses to protect themselves from the downturn by managing their exposure to risk, investing in customer retention strategies, controlling their costs and cash flows, and improving their internal business processes where possible.

‘While this may seem to be stating the obvious, we often find that businesses fail to focus on these basic principles early enough or, in some cases, at all. Today, more than ever, cash is vital, so cash generation and conservation should be top priorities.

‘In difficult times, it is important to keep onside all those who have an interest in the business continuing successfully, including banks, customers, creditors, employees and professional advisors. Businesses should keep everyone regularly informed rather than saving up bad news, which can cause panic and irrational action.’