In the last three months of 2010 , almost 148,000 firms faced serious financial problems.
It is suggested that Government cuts are making the problem worse.
The report predicted a rise as high as 10% in insolvencies in 2011, this means that as many as 23,500 small businesses could be affected.
In comparison with the July to September quarter of 2010, this period show an increase of 20% in the number of businesses facing serious or critical financial issues.
There are “real signs of distress” within UK firms, according to the report.
The report from Begbies Traynor, insolvencies showed that those who had been experiencing critical problems owe more than £52.7bn to creditors, suppliers and service providers.
This is down on the £57.5bn owed during the last quarter.
Ric Traynor, Executive Chairman of Begbies Traynor Group, said:
“Today’s figures show that UK businesses are demonstrating real signs of distress and that trade creditors are both losing patience with their debtors and in need of collecting cash into their own businesses.”
The IT, business services and construction sectors in particular were feeling the pinch, it found.
The report has shown that the sectors most affected by the public spending cuts are: construction, IT, recruitment, advertising and business services. With these sectors already seen a 24% increase in financial distress
“With the full implementation of budget cuts only starting to show through in these figures, public sector-exposed sectors are likely to face significant increases in the level of corporate failures over the course of 2011.”
The report adds that retail firms will be hit hard by the increased pressure as high inflation, tax rises and job cuts results in less disposable income.
This means that sectors that are not an essential for the average man would see “an increase in business failures”, he added.
Last weeks figures show that inflation rose to 3.7% in December from 3.3% n November.
Q4 2010 Red Flag Alert Statistics
‘Significant’ and ‘Critical’ problems by Sector:
|Sector||Q4 2009||Q4 2010||Percentage
|Q3 2010||Q4 2010||Percentage
|Print & Packaging||2,091||2,211||6%||1,757||2,211||26%|
|Transport & Comms||5,449||5,344||-2%||4,540||5,344||18%|
Figures also released last week show that unemployment rose by 49,000 to nearly 2.5 million between September and November.
In 2010 there were 15% fewer insolvencies that in 2009.
“For smaller businesses, we are entering the darkest hour before the dawn, as they face the dual challenges of weak domestic demand and greater pressure from larger competitors and business customers looking to preserve their own profitability,” said Mr Traynor.
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