Ripple effect of failed businesses threatens recovery

Construction firms continue to experience financial problems, with 30% more reporting significant or critical distress in the first quarter of 2010.

The latest Red Flag update from Begbies Traynor found 22,990 companies in the sector affected, compared to 17,736 in the last three months of 2009.

But compared to Q1 of 2009 things are looking up, with 5% fewer firms reporting problems.

Ric Traynor, executive chairman of Begbies Traynor, said: “While the economy appears to be showing signs of recovery, the magnitude of the liabilities still at risk of default represents a serious risk to creditors, indicating the potential far-reaching impact of these levels of distress. It is this ripple effect which represents a real threat to a sustained economic recovery.”

Construction was among the worst sectors affected, with just property services experiencing a higher rise. Professional services, recruitment and retail also fared badly.