Government cuts herald tough times for services firms

CONNAUGHT’S high-profile collapse has ushered in a period of intense difficulty for other services companies, according to the latest monthly City A.M./Begbies Traynor health monitor for the Square Mile.

The social housing maintenance specialist, which fell into administration last week, is not alone in having felt the pressure of impending government spending cutbacks and poor-quality contracts. Our numbers show 310 business and property services outfits based in the City exhibited signs of distress in August. London-wide, the figure came to nearly 2,140.

Their woes came despite an overall improvement in corporate health during the traditionally quiet summer month. The number of companies operating on the edge declined marginally to 1,806, while in the City the number fell to 1,363.

Nick Hood, partner at Begbies Traynor, said the insolvency practitioner’s separate Red Flag alert system identified around 17,000 business at risk across the UK in August in services sectors such as construction, IT and recruitment.

Hood added: “As the full impact of the October spending review begins to be felt in the latter part of this year and on into 2011, failures of these types of companies will inevitably rise, causing significant problems for the London economy.”