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Increase in the numbers facing 'critical distress'

THE number of businesses in "critical distress" in Scotland increased by 6% in the first quarter, according to figures that suggest life remained tough in sectors like leisure in spite of the economic recovery although conditions improved in the construction sector.

Begbies Traynor found 135 businesses facing serious financial problems in the first three months of 2014 compared with 127 in the same period of the previous year.

The accountancy firm highlighted a big increase in the number of firms in businesses like the hotel trade facing what it considers to be "critical distress". This includes firms facing winding up petitions or court judgements for more than £5000.

It said Scotland was the only part of the UK to record an increase in the total number of firms in "critical distress" in the first quarter compared with same period of 2013.

The number of bars and restaurants in "critical distress" in Scotland more than doubled to 16, from six in the first quarter of 2013.

The number of hotels facing such problems tripled to four from one.

"The hoped for return of consumer confidence seems to be lagging with a number of hospitality and leisure businesses, including bars, restaurants and hotels, continuing to struggle," said Ken Pattullo, group managing partner in Scotland for Begbies Traynor.

" Hopefully, they will receive a boost from the surge in visitors for the Commonwealth Games and the Ryder Cup as well as the First World War centenary commemorations and the anniversary of Bannockburn this year."

However, Mr Pattullo noted encouraging signs that Scotland is benefiting from an upturn in the beleaguered construction and property sectors.

The number of construction firms facing "critical distress" fell by 16% annually, to 21 from 25 in the first quarter of 2013. Some 32 firms faced "critical distress" in the last quarter of 2013.

The total number of firms in the category in the UK fell by 18% annually, to 3,063 from 3,283.

The number in "critical distress" in the first quarter in Scotland was down 14% on the 157 recorded in the preceding three months. The number increased in the UK, from 2,933.

Scotland fared better in terms of business facing significant distress, including those facing minor court judgements or judged to be at risk by Begbies based on trends in key measures like working capital or retained profits. The number of such firms in Scotland increased 15% annually in the first quarter, to 12,439 from 10,797. The number in the UK increased by 18% to 225,549.

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