More SMEs in financial distress despite economic recovery

The report said that these smaller retailers are the casualties of the current price war between Britain’s largest supermarket groups, which have slashed prices ahead of the busy Easter weekend in a bid to entice customers back from the popular discounters, Aldi and Lidl.

Julie Palmer, partner at Begbies Traynor Group, said: “Given current market sentiment, today’s news may be a bitter pill to swallow for many, but the fact remains that a growing number of SMEs remain at significant risk of falling into distress and need greater support if they are going to turn their fortunes around.

“In the worst performing industries such as retail, bars and restaurants, which are highly dependent on levels of consumer spending, smaller enterprises are simply unable to compete with the buying power of larger chains and have struggled to match the discounts offered by bigger competitors seeking to maintain market share.”

The research found that larger companies have enjoyed a 14pc decline in distress levels over the same period. SMEs now account for 92pc, or 207,505, of the 225,549 UK businesses facing "significant" financial distress compared to 169,800 at the end of the first quarter of 2013, when SMEs represented 89pc of all businesses at 'significant’ risk.

“Larger firms across the economy who have easy access to bank finance and years of experience on their side, have been able to take full advantage of the economic resurgence through measures such as extensive discounting, capacity expansion and increased marketing,” said Ms Palmer. “However, as the recent Government consultation into SME financing shows, smaller businesses are far too often coming up against a brick wall when trying to secure vital funding for growth.

“Unless this is addressed soon we expect this upwards trend in SME distress to continue through 2014.”

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