Written by: Keith Tully
Published: 29th January 2020
The number of British companies in a position of ‘significant financial distress’ reached record high levels during the final three months of 2019.
That’s according to the latest set of figures from the corporate insolvency and recovery experts of Begbies Traynor, whose Red Flag Alert research suggests that there are now around 494,000 businesses in significant financial trouble across the country.
Expectations are that 2020 could see that figure go beyond half a million with companies from across an array of sectors being impacted.
A notably high proportion of the businesses in significant distress were formed after 2014 and Begbies Traynor’s experts have suggested that younger companies are generally more vulnerable to failure than their better-established counterparts.
Sectors within which businesses are understood to be feeling most financial pressure include real estate and property, support services, construction and retail.
Most sectors accounted for by the data (15 out of 22) saw increases in cases of significant financial distress between the third and fourth quarters of last year.
It is widely taken to be the case that many UK businesses suffered financially in 2019 partly due to the political upheaval and uncertainty surrounding Brexit that persisted for so much of the year.
However, with the UK now on course to depart the EU, it’s hoped that businesses will have more certainty about what the future will hold and they’ll be able to turn that clarity into a greater degree of financial stability as 2020 goes on.
“Businesses and the UK economy as a whole will want to avoid a repeat performance of 2019, where distress increased to record levels on the back of ongoing uncertainty around Brexit,” said Julie Palmer, a partner at Begbies Traynor.
“These figures clearly demonstrate the impact of this indecision, and with political certainty and a clear Brexit path, UK businesses should, at last, be able to plan for 2020 with a greater sense of clarity.
“However, the macro economic climate is complicated and we are seeing clear winners and losers, as evidenced by this latest Red Flag data.
“Currently, we do not know if the failing performance within some sectors is due to short term confidence issues, or more fundamental economic and structural issues.”