MORE than 50,000 firms are at risk of looming Government cuts as businesses dependent on public spending feel the financial pinch, a report has warned.

The latest Red Flag Alert from insolvency firm Begbies Traynor showed that 50,299 firms across sectors such as construction, IT, recruitment, advertising and business services fell into financial trouble in the third quarter.

While the figure is 4% down on the previous three months, Begbies said this was a marked reversal of fortunes on the 20% improvement seen in its previous report.

The number of UK firms overall facing “significant” or “critical” financial distress stood at 123,361 in the three months to the end of September.

This marked a 10% fall year-on-year and a 3% decline on the second quarter.

But Begbies warned that this recovery could stall if public sector-facing firms are hit by Government austerity measures.

Begbies Traynor, which has offices covering Huddersfield and Halifax, said that firms across Yorkshire showed “continuing stability” with a 35% fall in the number of businesses facing significant or critical financial distress during the three months to September.

But it said critical problems faced 17% of construction firms, 16% of business-to-business companies, 10% of firms in transport and communications and 9% of retailers in the region.

Julian Pitts, of Begbies Traynor in West Yorkshire, said: “It will not be until the Government’s Comprehensive Spending Review in a week’s time that we will know for certain the allocation of all of the anticipated £83bn of spending cuts, but we are bracing ourselves for more than our fair share of the pain.

“Our Red Flag Alert statistics show that the sectors most likely to be most impacted are already starting to shows definite signs of financial distress.

“With confidence in the construction sector falling to an 18-month low, recruitment activity at its slowest for almost a year and a strong increase in distress in the advertising sector, there is a growing risk that even if the wider UK avoids a double dip recession, public-sector dependent industries face higher levels of financial distress.”