Number of UK Companies in Financial Distress ‘Falling Despite Brexit Uncertainty’

The number of British companies in a financially distressed position fell during the third quarter of this year in comparison with the previous quarter and the same period of 2015.

That’s according to a recently compiled report on the subject by the insolvency company Begbies Traynor, which has suggested that there are signs of resilience within the UK economy despite the uncertainty surrounding the country’s position in relation to the European Union.

Begbies Traynor’s ‘Red Flag Alert’ research report shows that there was a year-on-year decline of 2 per cent in the number of companies facing “significant financial distress” during the third quarter of the year.

At the same time, as compared with the previous three-month period, there was a 6 per cent decline in the number of firms counted as being significantly distressed.

However, there was still apparently almost 250,000 businesses across the UK which could be described in that way, with 92 per cent of them being small or medium-sized enterprises.

“Overall, the UK economy appears to be in a stronger position than expected following the EU Referendum result,” said Ric Traynor, Begbies Traynor’s executive chairman.

“While we wait to see whether the government opts for a ‘hard’ or ‘soft’ Brexit strategy, businesses at least appear to be better placed to tackle any new challenges on the horizon ahead of the government’s imminent negotiations.”

Notably, the sector in which the greatest improvement in financial wellbeing was recorded during the third quarter of the year was the construction sector.

According to the latest figures, there was an 11 per cent decline in the number of construction companies experiencing significant financial distress during the third quarter.

“UK construction firms appear to be bouncing back after the initial Brexit shock, when in July construction activity initially shrank at its fastest pace since 2009,” commented Julie Palmer, a Begbies Traynor partner.

“The good news for this sector is that these businesses can also expect a further boost following recent policy announcements including the £3 billion Home Builders Fund, plans to accelerate construction on public land and the unlocking of brownfield sites across the country.”

Palmer added that construction sector businesses and particularly SMEs will now be looking for further cause for optimism in the upcoming Autumn Statement from the Chancellor of the Exchequer.