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More than 140,000 companies reported financial difficulties at the end of last year, while retail businesses experienced a 32% decline in 'critical actions.
Research carried out by corporate rescue and recovery specialists Begbies Traynor revealed that more than 140,000 companies experienced serous financial problems in the last quarter of 2009.

The company explained that the results demonstrate "high levels of corporate distress, despite the positive effects of government's financial stimulus", such as quantitative easing and the 2.5% VAT cut.

It also warned that companies are collapsing at a faster rate than seen in recessions in the past, stating that "a new trend is emerging, which indicates that a higher number of business failures are occurring at an earlier stage of deterioration than in previous recessions."

However, it was also revealed that the retail sector saw "significant improvement" with a 32% decline in what it describes as 'critical actions' in Q4 compared with the previous quarter. Businesses in the sector benefited from increased sales over the Christmas period and, said Begbies, "relatively low levels of adverse actions... as creditors hold off from taking action while retailers realise cash during the important Christmas trading period."

Encouragingly, while 6% higher than Q3 2009, the number of businesses experiencing significant and critical financial problems in Q4 is still 14% lower than the same period in 2008. This is believed to be somewhat attributable to "a more lenient approach amongst creditors", explained Begbies, compared with the 'near panic' mode to collect debts in the aftermath of the collapse of Lehman Brothers a year ago.

Despite this, while Begbies also believes that the government's support is going some way to helping UK businesses, it fears that it may lead to a surge in failures later on this year when the measures are pulled.

A particular concern is the termination of the 'time to pay scheme' under the HMRC's Business Payment Support Service, which allows struggling firms to spread their tax payments over a timetable they can afford. Although Chancellor Alistair Darling said he would extend the scheme for "as long as it is needed", it is expected to come to an end later this year.

Begbies Traynor Group executive chairman Ric Traynor said: "Government support measures are providing welcome relief to the UK's struggling companies in the short term but they may exacerbate problems for some businesses as the need to repay debt catches up with them later in the year."

He added: "Experience of the last four recessions tells us that unemployment levels and corporate and personal insolvencies have lagged behind technical recession by one to two years. With tax and interest rates certain to rise, as well as increasing pressure on consumer spending, there is every reason to suggest that the insolvency peaks of this recession remain some way off.
"While business finance is expected to become more readily available during the first half of 2010, we anticipate a rise in the levels of financial distress during the second half of 2010, as temporary financial support measures are unwound."