SOUTHAMPTON and Hampshire businesses are in a better position to deal with the economic difficulties ahead than other areas of the country, according to an insolvency expert.

This comes after a report revealed that in the last year businesses here have weathered the effects of the recession better than the UK as a whole.

Figures provided by rescue and recovery specialist Begbies Traynor’s Red Flag Alert show that the number of Southampton businesses struggling financially fell by three per cent in the last quarter of 2010 compared with the same period in 2009, while Hampshire saw a year-on-year decrease of 10 per cent.

Both figures compare favourably with the UK, which saw a four per cent increase over the same period.

Antony Fanshawe, partner at Begbies Traynor, said, although he believed the UK was yet to feel the full force of the recession because public spending has been kept high and interest rates have been kept low, Southampton and Hampshire may perform better than most in 2011 when he expects conditions to worsen.

He said: “Southampton and Hampshire businesses have performed relatively well over the last couple of years compared to other parts of the country.

“They are reasonably well placed under the current economic conditions, but not withstanding that I would personally expect the number of insolvencies to rise this year.”

Mr Fanshawe said a combination of the rise in VAT, cuts in public spending and tighter operation of the time to pay arrangements by HMRC as well as the effect of possible inflation and higher interest rates would “make life difficult for businesses”.

The economic data shows the number of financially struggling businesses in Southampton actually rose by nine per cent between the third and final quarters of the year, but Mr Fanshawe said this reflected the impact of the spending review.

The Red Flag Alert measures corporate distress signals and categorised distressed businesses as either critical, when they have county court judgements of £5,000 or more, and/or winding-up petition related actions, or significant, with either a court action and/or poor, very poor, insolvent or out of date accounts.

In quarter four of 2010, Southamp-ton recorded 976 ‘distressed’ businesses compared with 1,008 the previous year. Of those, 19 per cent were business-to-business services, such as management holding companies and office machinery maintenance, and 17 per cent were from the construction sector.

A spokesperson for Hampshire Chamber of Commerce Southampton office said the figures appeared to be good news, though times were uncertain and business confidence was fluctuating.

“With the increase in VAT and a potential rise in interest rates, as well as Government spending plans the outlook will be difficult for many businesses,” he said.