City firms see woes pile up since January

WHOEVER takes the keys to Number 11 Downing Street will inherit an increasingly troubled financial sector, according to the first monthly City A.M/Begbies Traynor health monitor for the Square Mile.

Despite the pick-up in equity markets and bank profits, our figures show the number of City financial firms experiencing severe stress has shot up by 55 per cent since January.

More than 80 companies including stockbrokers, boutique corporate finance houses and property investors struggled to survive in April. The rush of clients’ cash into equity markets is thought to have drained business away from specialists, while political uncertainty around the election has made bank funding harder to come by.

Although financial firms are faring worse than their counterparts from other sectors, our survey found the number of general City-based companies suffering from serious problems has also risen by a third since the start of the year. In the past four weeks, nearly 5,300 businesses including retailers, advertisers and engineers were operating on the brink.

Our numbers underline the challenges facing the next Chancellor.

Begbies Traynor partner Nick Hood said: “Despite the apparent recovery in the City’s fortunes since the dark days after Lehman filed for bankruptcy in October 2008, it seems there has been a sharp deterioration this year in the financial health of City-based businesses... With sovereign debt problems in Greece, Portugal and Spain threatening a ripple of contagion into the UK and other European banking sectors, 2010 could be another challenging year.”