One in five UK businesses ‘financially stressed’, says KPMG

One in five UK businesses are "financially stressed", according to new research from KPMG’s restructuring practice. The practice analysed the filings of all UK businesses with revenues over £10m in the five year period to the end of 2018. Trading performance, profitability, cashflow, liquidity and debt leverage were all analysed to produce a score to identify financial stress and distress among these businesses. Over the period, the proportion of businesses in financial stress increased from 19% to 21%, but businesses that identified as distressed remained steady at 4%. In “absolute terms”, financially stressed UK businesses increased from some 4,300 in 2014 to 5,700 in 2018, a compound annual growth rate of 7.7%. Businesses in more acute financial distress rose from 800 in 2014 to nearly 1,100 in 2018, a compound annual growth of 8.9%. Sectors with the largest proportion of companies in financial stress and distress were retail, leisure and hospitality, building and construction, industrial manufacturing and consumer production. Blair Nimmo, head of restructuring at KPMG UK, said: “Whilst the number of companies bringing in revenues of over £10m has grown strongly over the last five years - highlighting the underlying strength of the British economy - there’s no doubt that such growth can bring with it significant challenges. “Whether its long-established companies battling against well-known economic headwinds, or those entrepreneurial scale-ups who are struggling to maintain a grip on cash flow during periods of rapid growth, the fact is that without action, stress can very quickly turn into distress.” He added: “When we talk about ‘stress’, we typically mean companies which may have experienced instances of negative cashflow or working capital, defaulting on debt repayments or with a high debt-to-equity ratio. “Taken individually, all can be relatively manageable. However, an accumulation of such factors can indicate a company is veering towards distress – and possibly insolvency.”

One in five UK businesses ‘financially stressed’, says KPMG

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