The number of UK staffing companies experiencing significant or critical financial distress continued to fall in Q3, according to business recovery specialist Begbies Traynor. However, the company warns that across all sectors the rate of improvement was at its slowest for five quarters.

According to Begbies Traynor’s last Red Flag Alert statistics, the number of UK staffing companies in significant distress fell by 11%, from 1,381 in Q3 of 2009 to 1,231 in Q3 2010.  There was a smaller fall of 4% when compared with Q2 of 2010.

According to the firm, the latest quarter was also marked by a significant increase in the number of HM Revenues & Custom wind-up petitions - up 39%between August and September, showing that the government may be getting tougher on chasing taxes to increase revenues from both corporates and individuals.

Commenting on the figures, Ric Traynor executive chairman of Begbies Traynor Group, says: “The decline in the numbers of businesses in distress reflects a combination of lenient creditor attitudes and the effects of temporary government support initiatives, including quantitative easing, the time to pay scheme and low interest rates.

“However, the marked slowdown in the rate of recovery points to the renewed challenges facing UK corporates, as reflected by a recent significant weakening in corporate confidence, and there is some early evidence that creditors such as HMRC are adopting a harder line in collecting debts.”