Public-sector cuts hit firms

THE number of Scottish companies in financial trouble jumped at the end of last year as public-sector cutbacks began to bite, figures released today suggest.

Firms are facing problems raising finance and getting paid by customers at the same time as their orders books are shrinking, according to the “Red Flag” report by Aim-quoted accountancy firm Begbies Traynor.

In Scotland, 382 businesses were in “critical” distress – facing winding up orders in the courts – during the three months to 31 December, compared with 330 in the previous quarter.

Ken Pattullo, group managing partner in Scotland for Begbies Traynor, warned: “We had expected the impact of public-sector cuts in Scotland to lag behind the rest of the UK due to the timings of the respective elections, but we now appear to be feeling the knock-on effect through the wider Scottish economy.

“We could continue to see this through the next two or three quarters. Just about every sector has now felt the effects of the recession and the squeeze on the economy.

“We are seeing critical distress at firms that have managed to stagger along through two tough trading years.”