131% rise in property services firms facing critical problems

131% rise in property services firms facing critical problems


Business restructuring firm, Begbies Traynor, has released its quarterly monitor of early warning signs of company distress, which reveals that property and financial services firms are amongst the hardest hit in the current climate. 

The Red Flag Alert report has shown the number of property services companies suffering from “significant” financial distress has soared by 82% since the second quarter of 2008, whilst the number of financial services firms facing significant problems rose by 76% during the same period.


As for the number of companies showing “critical” problems in the last year, in the property services sector the figure has risen by 131%, from 235 companies to 543. There was also a 78% rise in financial services firms over the same period, from 64 firms to 114.


Businesses with significant problems are classed as those with either a court action or poor, insolvent or out of date accounts. Businesses with critical problems, on the other hand, are those with CCJ’s totalling £5,000 or more and wind-up petition related actions.


Begbies Traynor has said that, from experience, a significant number of those companies with such financial problems tend subsequently to enter into a formal insolvency procedure within a year.


Nick Hood, Partner at Begbies Traynor, commented: “As the property services sector is so closely linked to the commercial property market, we are seeing a strong echo of the problems faced by commercial property companies.


“The worst case scenario, where landlords are left with empty properties, is compounded by escalating tenant defaults and attempts to reduce rental obligations on occupied buildings. All these troubles filter their way down the food chain to the estate agents and property management companies who are already being squeezed by a stagnant property market.”

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