Fall in financial distress for the pub and restaurant sector

By John Harrington

- Last updated on GMT

Related tags Begbies traynor Better Corporation

Fall in financial distress for the pub and restaurant sector
The bar and restaurant sector was the most improved among consumer-facing industries in Q1 2013 in terms of financial distress.

The number of companies experiencing “critical” financial distress in the sector was 135 in the quarter, a decline of 10% on Q4 2012 and 66% down on Q1 2012, new figures from Begbies Traynor show.

It compares to a 12% year-on-year increase in critical distress in the leisure sector, from 34 to 38, and a rise of 24% to 168 in general retailing.

“Unseasonal weather and changing consumer habits have led to further struggles within many consumer facing sectors, with retail and leisure being among the worst losers this quarter,” Begbies Traynor said.

The group’s Red Flag Alert research for the quarter, which monitors the financial health of “corporate UK”, shows that the recovery of UK plc continues, with a 34% decline in critical financial distress among UK businesses compared to Q1 2012.

Julie Palmer, partner at Begbies Traynor, said: “The year on year improvement reflects the continued forbearance and benign monetary conditions facing UK businesses today, combined with an improving credit environment, albeit primarily for larger corporates. Business confidence is slowly returning in the form of greater business spending on both services and investment.”

However, it says lack of funding still a significant issue for UK small and medium enterprises. Analysis of new lending to business across the Red Flag database, which is predominantly SMEs, found the number of companies that secured new funding, at 15,804 in Q1 2013, was down 14.5% from 18,943 companies in Q1 2012 and down 11% from 17,823 in Q4 2012.

Palmer added: “The underlying trend is arguably one of an improving picture. However, given the slight increase in distress compared to the previous quarter, it remains to be seen if we are out of the woods yet.

“With business rate increases planned in April, HMRC’s new PAYE Real Time Information requirements coming into effect, and further minimum wage rises ahead there are still significant headwinds for the UK SME sector, which is typically less able to bear the burden of these changes than their larger counterparts.”

Related topics News