The number of companies in Britain that are facing bankruptcy rose 685 per cent in the last year, new figures have revealed.
Some 4,258 firms faced “critical problems” – defined as being embroiled in some kind of insolvency related legal action – in the second quarter of 2008, compared with just 542 in the same period the year before, according to research by corporate rescue firm Begbies Traynor.
Groups with “critical” financial problems are defined as those companies with CCJs (County Court Judgments) of £5,000 or more, or those with Wind-up Petition related actions.
A company’s creditor or bank can take a CCJ out to claim money that is owed to them.
Credit-crunch related problems and a worsening economic climate have resulted in more companies facing financial ruin in the last year.
The number of firms with “critical” problems was 30 per cent higher in the second quarter of the year, compared to the three months before.
Ric Traynor, chairman of Begbies Traynor, said: “With credit conditions still tightening, these new figures demonstrate that the effects are certainly getting worse, and we would anticipate that they will continue to do so, certainly until the end of this year at least.”
Worst hit have been the construction, retail and IT sectors. Over the last year there was a 370 per cent increase in construction firms with serious financial difficulties. The collapse of the housing and mortgage market and the rising cost of building materials such as cement and steel has hit the sector hard.