489,000 businesses in ‘financial distress’ since EU ref, study finds

Research from Begbies Traynor, hs revealed that numbers of businesses in “significant financial distress” has increased 40% in the three years since the EU referendum, affecting 489,000 UK businesses. The latest data for Q3 2019 found there were large numbers of UK trading businesses experiencing significant financial distress at the end of September 2019. Over the past year significant financial distress has increased in 20 out of the 22 sectors monitored by Begbies Traynor. It also found there was a marked increase in the number of businesses in “critical financial distress” during the same period – often a precursor to formal insolvency – with a substantial 8% year-on-year rise. Julie Palmer, partner at Begbies Traynor, said: “Three years on from the referendum and the latest Red Flag research highlights just how businesses are struggling as a result of uncertainty and a lack of investment. “With a considerable increase in the number of businesses suffering significant financial distress in the last three years there is growing frustration among businesses that they cannot plan for the future and the whole economy is lagging as a result.” The real estate and property sector, often considered a bellwether of the UK economy, was found to be particularly affected with a 16% increase in the number of businesses in significant financial distress from Q3 2018, the highest year-on-year percentage increase across any sectors measured in the Red Flag Alert research). However, this deterioration has been even more marked since the EU referendum with a 78% increase in significant distress (Q3:2016 - 28,633). Elsewhere, the tough trading conditions for high street retailers has now spread to the e-commerce retail sector. Often viewed as immune to the travails of the sector, the latest figures demonstrate that online retailers have experienced a 10% increase in significant distress since Q3:2018. Ric Traynor, executive chairman of Begbies Traynor Group, said: “This is a worrying assessment of the UK economy, with nearly 500,000 businesses now in significant financial distress – almost 150,000 more than three years ago. “The broader macro economic environment is a real concern and could ultimately have a much greater impact on UK business than the specific terms of any Brexit deal.” He added: “The growth in protectionist trade policies, combined with faltering consumer demand in both the US and Europe are a real concern. Add to this the concerns surrounding China’s debt, which now stands at three times its GDP and we could be in for the perfect economic storm.”