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Mid-market firms feel the upturn strain

MIDDLE market lawyers and consultants are struggling to tap into the nascent economic recovery, according to the second monthly City A.M./Begbies Traynor health monitor for the Square Mile.

While bigger players are benefiting from the return of property development and corporate activity, our numbers show smaller operations are fighting to survive as clients demand more work for lower fees.

Nearly 1,070 property services outfits across Greater London suffered severe problems in May, up a third on the previous month, while more than 1,800 assorted business services groups showed signs of serious distress, up 57 per cent.

On Friday, the Department for Transport put on ice £1.6bn of schemes not already under contract in one of the first austerity measures to have a direct impact on London’s private sector. A further £6.2bn of spending cuts are due this year.

Levels of corporate stress also rose in the City, our figures show. Nearly 1,280 companies battled to finance themselves in May, up 20 per cent on the previous month. Financial services and IT firms were among the worst affected.

According to Begbies Traynor, the insolvency specialist, a third of the companies picked up by our survey could fail within the next year as the recovery strains their already-depleted capital resources.

Nick Hood of Begbies Traynor said: “Despite encouraging talk of increased levels of recruitment activity in the City, there are still many potential losers struggling to cope. There will be many casualties as we move into the traditional post-recessionary insolvency surge.”