The UK will narrowly miss a triple dip recession, according to the most recent Begbies Traynor research on corporate financial health.
The firm's Red Flag Alert shows a 34% decline in 'critical' financial distress among UK businesses in the first quarter of this year, compared to Q1 2012, with the numbers down from 5000 to 3283.
However Begbies Traynor warns that this positive outlook is led predominantly by improvements in the UK's business services sector and masks a patchy recovery. It says sectors reliant on the consumer economy (general retail, leisure and media) as well as real estate witnessed an increase in financial distress for the period.
Julie Palmer, partner at Begbies Traynor, said: 'Thanks to improving business confidence, increasing demand for advisory services and a revival of transactions, the support and professional services sectors are gaining momentum. The situation has certainly been helped by the fact that many of these businesses have reduced their cost bases significantly during the downturn such that any uptick in activity quickly improves their bottom line.'
In contrast, companies experiencing 'critical' financial distress in general retailing were up 24% (168 cases in Q1 2013 from 137 the equivalent quarter last year), while 'critical' distress levels in the leisure sector increased 12% over the same period.
The survey also shows that lack of funding for SMEs remains a concern. Begbies Traynor's figures indicate a 14.5% drop in the number that secured new funding in Q1 2013 compared with Q1 2012.
Ric Traynor, executive chairman of Begbies Traynor Group, said: 'The 34% fall in critical distress levels across the UK is another welcome sign ahead of this week's GDP announcement and indicates that the economy may have finally turned a corner. The return to strength of the UK's important business services sector is particularly encouraging for the whole economy but the ongoing lack of funding to the SME sector, which is a fundamental driver of the economy, remains the greatest obstacle to a stronger and sustained recovery.'
