The number of firms in financial distress has fallen by 21% since Q1 2010, according to business rescue, recovery and restructuring specialist Begbies Traynor.

The research also shows the £69.5bn of liabilities at risk of default is up 26% from £55bn in Q1 2010, while  average debts of troubled companies have risen 60% to £545,000 in Q2 2010 (Q1 2010: £340,000).

Around  52,000 companies are already experiencing distress in sectors most dependent on public sector spending (construction, IT, recruitment, advertising and business services),  while  the  outlook for corporate credit availability for Q2 2010 is at its lowest level since the end of 2008.

Ric Traynor, executive chairman of Begbies Traynor Group, says: “We believe that a combination of lenient creditor attitudes and temporary government support measures… have all had an effect on reducing the volume of adverse actions, providing a welcome respite to many companies that may have otherwise found it difficult to survive.

“However, we are concerned that the levels of business distress will increase again, potentially from the first half of 2011, once the full effects of the coalition government’s fiscal tightening measures impact the economy and particularly amongst those private sector businesses most dependant on public sector contracts.”