Written by: Keith Tully
Reviewed: Tuesday 22nd October, 2019
The number of companies across the UK in a position of ‘significant financial distress’ has increased in recent months to reach a total of close to half a million.
Figures compiled by the corporate insolvency and recovery experts of Begbies Traynor suggest that there were 22,000 more businesses in significant distress at the end of the third quarter of 2019 as compared to the same point in 2018.
Meanwhile, the number of companies that are in ‘critical’ financial distress has also risen sharply on the same comparative basis and by 8 per cent year-on-year.
As many as 139,000 more companies are now considered to be in significant distress than was the case prior to the 2016 referendum on the UK’s membership of the European Union.
Now with close to half a million business in significant financial trouble, the areas of the economy believed to be struggling most include the real estate and property, construction, retail and travel sectors.
However, instances of significant distress are understood to have increased over the course of the past year in 20 of the 22 different sectors monitored by Begbies Traynor’s Red Flag Alert research.
The real estate and property sector saw the sharpest jump in significant distress rates over the past year, with 16 per cent more enterprises in the field now counted as struggling as compared to a year earlier.
The 8 per cent year-on-year jump in the number of firms in critical distress suggests that a growing number of companies are being pushed close to formal insolvency, with political and economic uncertainty regarded as notable factors contributing to that trend and to some of the difficulties currently being faced by businesses across the country.
“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,” said Julie Palmer, a partner at Begbies Traynor.
“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.”