THE number of businesses in the Portsmouth area which are in financial trouble has fallen by a quarter, new figures have revealed.
But the Red Flag Alert issued by Begbies Traynor says so-called zombie companies, which constantly need grants or loans to survive, are stifling growth in the long term.
The firm, which has its Portsmouth office at 1000 Lakeside, North Harbour, said that in the south east, one per cent fewer businesses faced critical issues between July and September 2012 than at the same time in 2011. The national figures show a fall of 22 per cent.
In Portsmouth there has been a 25 per cent fall in businesses with critical issues between quarter two and quarter three of this calendar year.
Julie Palmer, partner at Begbies Traynor’s Portsmouth office, said: ‘The statistics reflect what I believe is a more stable economic environment for businesses in Portsmouth and across the south east.
‘While we are not seeing growth, companies are controlling costs, improving efficiencies and grappling with the economic conditions. As a result there are fewer businesses in financial difficulty.
‘The national picture is also encouraging as businesses across the UK are more stable.
‘However, there are still a significant number of companies being supported beyond their normal lifetime by banks providing capital repayment holidays.
‘Experience suggests many of these only delay the failure and such poor-performing businesses could be stifling our recovery and growth.’
In terms of sectors which are doing better between the second and third quarter, the Red Flag Alert has shown that retail in the south east saw a 24 per cent fall in businesses at risk.
Automotive businesses saw a 30 per cent decrease, and professional services saw a huge 49 per cent drop.
But, surprisingly, whilst manufacturing businesses in the Portsmouth region are still performing strongly, thanks to strength in the shipbuilding, communications and defence industries, the south east saw a 23 per cent rise in businesses at risk.
At the same time, other so-called ‘losers’ included wholesaling firms, which saw 29 per cent more firms facing critical issues.
Julie added that, compared with other regions across the UK, the south east has performed well, with only London and the Midlands showing a larger fall in year on year figures.