Written by: Keith Tully
Published: 24th July 2018
The number of companies across the country who are considered to be in ‘significant’ financial distress increased by 9 per cent between the second quarter of last year and the same period of this year.
That’s according to figures compiled by the insolvency specialists of Begbies Traynor for its latest Red Flag Alert report.
A total of 472,183 businesses are believed to have experienced significant financial distress in the three months prior to the end of June, which represents a notable jump compared with the same period of 2017 but a slight fall of 1 per cent compared to the previous quarter.
Based on this evidence, Begbies Traynor has described circumstances across different business sectors as having “stabilised” in recent months but the year to year figures paint a somewhat different picture.
Between the second quarters of 2017 and this year, there were 4 per cent more companies facing significant financial distress in both the construction sector and among the UK’s retailers.
Meanwhile, there was an increase of 19 per cent in the number of real estate companies in trouble and a 9 per cent rise in significantly distressed telecoms businesses.
The region in which corporate financial distress is most prevalent is the South East of England, according to the Red Flag Alert figures.
London alone had 118,367 companies in significant financial distress in the second quarter of this year, which represents a year on year increase of 17 per cent but a 1 per cent fall compared to the first quarter of 2018.
Julie Palmer, a partner at Begbies Traynor, has given a cautious welcome to her company’s most recent figures, suggesting that they may reflect “tentative signs of stability returning to the UK economy”.
However, the corporate distress expert, also noted that the outlook for businesses within many certain remains decidedly uncertain.
“The problems facing high street retail have been well documented of late, with the recent epidemic of CVAs and store closures being just the tip of the iceberg,” Ms Palmer said.
“However, the UK Automotive sector looks to be most at risk in our view, facing job cuts and a slowdown in production output and investment, as industry pundits question how it will be able to compete with European competitors post Brexit.”