Businesses are advised to utilise credit insurance to minimise knock-on risks
Bars and restaurants, businesses in the leisure and culture sectors, and professional service firms have all reported suffering from a drop in demand, as consumers continue to tighten their belts.
The recent research, published by Begbies Traynor, reported that 186,554 UK businesses are now experiencing ‘significant’ or ‘critical’ financial problems, compared with around 161,000 in the first quarter of 2010, which equates to a 16 per cent increase.
Analysts believe that shoppers are unwilling to shell-out for large purchases due to job insecurity and the knock-on effect from January’s VAT increase.
However, the most recent insolvency statistics showed a sustained dip in the number of businesses filing for liquidation across many sectors, suggesting that opportunities for growth are beginning to arise.
Martin Walmsley head of debtor insurance at Lloyds TSB Commercial Finance, said: “It is essential for businesses in all sectors to tread with caution as the economy begins to recover.
“However, firms should not be disheartened by these figures, as the economy is expected to grow this year and expansion opportunities and new contracts are out there for ambitious firms to capitalise on.
“To ensure your business is protected against late or non-payments from a customer that may be experiencing financial problems, I would advise utilising a credit insurance policy.
“Debtor Insurance provided by Lloyds TSB Commercial Finance safeguards companies from up to 90 per cent of bad debt suffered as a result of customer insolvency.”