Beth Ashmead-Latham 27 Apr 2018 12:03pm

Financial distress soars among UK businesses

The number of businesses experiencing “significant financial distress” has increased by 33% since Brexit was triggered in March last year

Significant distress rose across every sector in the UK, with 477,210 businesses experiencing it in Q1 compared to 358,943 during the same quarter last year, according to business recovery group Begbies Traynor’s Red Flag Alert research.

Financial services had the fourth highest increase in financial distress (up 45%), behind telecommunications (47%), professional services and real estate and property (both up 46%).

The report described the rise in financial and professional services as a “worrying trend given the importance of these industries in the government’s negotiations over future trade deals”.

Julie Palmer, partner at Begbies Traynor, said that while uncertainty over Brexit negotiations is likely to have had an impact on business confidence, currency fluctuations, rising interest rates, subdued consumer spending and a “cooling property market” are all contributing factors.

“Should these headwinds continue, they could impact the government’s bargaining power when it comes to negotiating new trade deals after the UK’s exit from the European Union, which would be a major concern,” she said.

Begbies Traynor’s executive chairman, Ric Traynor, said that if the Bank of England raises bank rates as it has been suggested it will do this year, that this “could push many struggling businesses, particularly those with high levels of debt, into formal insolvency”.

He acknowledged that UK growth is lagging behind that of other countries in the G20, but said that the recent recovery of sterling and eventual clarity regarding the UK’s eventual exit from the EU were predicted to have big positive impacts on business confidence.