The level of businesses experiencing financial distress has decreased 7% year-on-year, signalling the possible arrival of an economic recovery.
According to data from the latest Begbies Traynor Red Flag Alert, the number of businesses in “critical financial distress” dropped to 3,063 in Q1 2014, down from 3,283 during the same period in 2013.
The figures show there is cause for optimism for the UK economy as the financial services, construction, and travel and tourism sectors experienced 31%, 15% and 13% decreases in distress levels respectively.
However, quarterly figures show an increase of 4% in distress levels between Q4 2013 and Q1 2014 (2,933 to 3,063).
Julie Palmer, partner at Begbies Traynor, commented: “These latest figures are proof that the UK economy hasn’t just turned a corner, but is getting firmly back on its feet.
“However, Q1 has historically been a difficult period for UK businesses, especially for those in consumer facing sectors with the post-Christmas slump caused by a tightening of customers’ belts due to excess festive spending.
“This year businesses have also been hit by adverse weather, undoubtedly deterring people from leaving their homes.”
Consumer-facing sectors were those experiencing the fastest rising levels of financial distress, with the food retail (86%) , general retail (4%), bars and restaurant (7%), media (16%) and hotel (23%) sectors all seeing increases quarter-on-quarter.
Ric Traynor, executive chairman of Begbies Traynor Group, added: “Whilst we had seen positive signs that financial distress was reducing during 2013, the early stages of an economic recovery are often a lot harder for businesses to negotiate than recessions themselves.
“Companies have worked hard to balance their finances but now need access to additional finance to fund increased customer demand as the economy improves.”