40% fall in companies in financial distress raises in second quarter, according to restructuring specialist Begbies Traynor.
The number of companies in financial distress dropped sharply in the second quarter, in the latest sign of improvement in the wider economy.
Businesses in a "critical" condition fell 39% to 3,001 between April and June compared with the same period a year earlier, according to a report by restructuring specialist Begbies Traynor.
Julie Palmer, a partner at Begbies, said it was the "first real sign that the UK economy has turned a corner towards a sustained recovery".
She warned however the worst may yet be to come for so-called zombie businesses, which are smaller companies that have survived the recession but are chronically underfunded and do not have sufficient cash to take advantage of a recovery.
"We have real fears that many small and medium-sized enterprises will have serious financial difficulties at the time they least expect - during a recovery.
"Our experience has shown time and time again that many SMEs run out of cash during the recovery phase, as there is a real temptation to overtrade," Palmer said.
The Begbies red flag report, which monitors early signs of financial distress among companies, said that businesses in critical distress also fell 9% in the second quarter compared with the first.
Continue reading Economic recovery hopes boosted by drop in failing firms
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