Surge in firms facing financial difficulties

Date: 20th January 2010

The early removal of government fiscal stimulus could leave UK businesses with more financial difficulties than they currently face.

This is the view of Begbies Traynor which revealed in its latest Red Flag Alert that more than 140,000 companies experienced "significant and critical" financial issues during the last quarter of 2009.

According to the report, with the removal of government measures such as quantitive easing and HMRC's 'time-to-pay' initiative, the situation is set to become worse still.

Figures from the report showed that more than £4.2 billion of tax liabilities have been deferred through 242,000 arrangements under HMRC's "much needed" Business Payment Support Service.

Matthew Fell, director of corporate affairs at the Confederation of British Industry (CBI), said: "The outlook is still pretty bumpy, and there will be more failures on the way. So we do recognise that lag effect, albeit against the backdrop of the economy overall beginning to pick up, potentially from midway through this year.

"We also know that we have got the twin threat to come of higher taxes both for firms and individuals – those are inevitable to restore the public finances."