Study Finds More SMEs in Financial Distress Despite Economic Recovery

The economic recovery is supposed to be making life easier for entrepreneurs and small businesses, but a new study from insolvency practitioners Begbies Traynor has suggested that the number of small businesses in ‘significant’ financial distress has increased over the last couple of years.

The latest Begbies Traynor Red Flag Alert has revealed that the number of SMEs in financial distress has risen by 40% in the last year alone, rising from 176,677 in the second quarter of 2013 to 237,362 today. These SMEs are at significant risk, with a mooted 1% interest rate rise scheduled for November likely to put struggling business in ‘dire straights.’

‘The deteriorating fortunes of SMEs spells bad news for the economy at a time when there are a number of near-term challenges on the horizon for UK businesses,’ said Begbies Traynor partner Julie Palmer.

There are fears that struggling SMEs could become ‘zombie companies’ if financial pressures take their toll, capable of repaying the interest on their debts but not the debts themselves. While the economic recovery is supposed to be making life easier for Britain’s small business leaders and entrepreneurs, this study shows that we aren’t out of the woods yet.

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