Written by: Keith Tully
Published: 28th April 2019
As many as 484,000 British businesses were in a state of significant financial distress after the first three months of this year, according to the latest Red Flag Alert data compiled for Begbies Traynor.
The corporate insolvency experts also report that Q1 2019 saw the number of companies in ‘critical’ distress increase by 17 per cent as compared with the same period in 2018.
Strikingly, the proportion of companies understood to be in a state of significant distress is now up as high as 16 per cent across the country.
According to Begbies Traynor, the area of the economy most badly affected by financial problems in the first three months of the year was the property sector, which saw the number of significantly distressed operators increase by 13 per cent year-on-year in the first quarter.
As of the end of March 2019 there were believed to be 48,182 property sector businesses in significant financial distress, up from 42,512 after the first quarter of last year.
Meanwhile, the construction sector has also seen a notable rise in the number of significantly distressed companies, with the figures there increasing from 11,813 for Q1 2018 to 13,018 after the first three months of 2019.
The financial services sector saw a 5 per cent rise in the number of companies in significant distress between the first quarters of last year and this year, with operators in the field particularly badly impacted by Brexit-related uncertainties.
Hotels and accommodation companies, as well as those in the leisure and cultural sector, have also met with a challenging environment of late, in part as a result of labour supply issues blamed on Brexit but also as a result of increasing costs associated with the rise in the National Living Wage.
“Many UK businesses are currently in limbo and deferring major investment decisions,” says Julie Palmer, a partner at Begbies Traynor.
“This combined with consumers holding back on big ticket purchases has resulted in increasing significant distress across many sectors.
“This trend is reflected in our latest Red Flag research which clearly shows that capital intensive sectors – such as construction and property – are suffering.”
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