More companies experiencing 'significant' financial distress

There has been a rise in companies experiencing significant and critical financial distress, according to a new report.

Monitoring the warning signs of companies in distress, the Red Flag report found that there were 14 per cent more companies facing financial problems in the first quarter of 2010 compared with the last quarter of 2009.

This is the second consecutive quarter of increases in the number of companies in trouble, which, the report said, could hinder the economic recovery in the country as well as affecting unemployment levels and insolvencies.

However, a recent survey by the Federation of Small Businesses (FSB) of 1,400 of its members, found that almost one-third expect a slight improvement in the economy over the next three months when compared with the last three.

John Walker, national chairman of the FSB, said that the next government should "look at ways to help small firms stay afloat".

"This could be achieved by making it harder for HM Revenue & Customs to close small businesses down if they are late on tax payments, better access to affordable finance and credit, and for government and big business to pay invoices on time to ensure a steady cash-flow in the small business community," he added.

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