Research by Begbies Traynor’s, Red Flag Alert which monitors the wellbeing of UK companies, has released figures which clearly show the number of companies now experiencing ‘Significant’ distress has risen at the highest rate for 3 years.
Amongst those businesses identified, SME’s have been the hardest hit with numbers increasing by 26% to 308,423, whilst larger organisations up by just 12% year-on-year to 21,411 at the end of Q2 2017.
Red Flag Alert attributes these figures to a number of contributing factors including, rising fuel and wage bills and a weakened pound which, hand in hand with the general listless UK economy is now widening the cracks as businesses struggle to mange the balance between absorbing rising costs in a bid to remain competitive and passing those increases on to the consumer. In addition, uncertainty over a hard or soft Brexit is resulting in a reluctance to invest, just as the country needs SME businesses to be a strong foundation to help build the UK’s growth post-Brexit.
The Q2 2017 statistics released by Begbies Traynor highlight a number of sectors which are more vulnerable to the effects of rising costs, with property up 32%, 28,259 real estate businesses (Q2 2016: 21,373) and construction by 22%, 40,495 compared with 33,222 in the same period in 2016. Companies dependent on consumer spending have also been particularly affected; the research shows a 22% year-on-year upsurge of ‘Significant’ distress amongst leisure businesses (Q2 2017: 8,206 vs Q2 2016: 6,700). It is expected, as cost increases are starting to trickle through to the consumer, any business reliant on discretionary spending will face further pressure.
Begbies Traynor, the UK’s leading independent business recovery practice, is experiencing the first increase in insolvency numbers since 2009. 2016 saw figures plateau, following a 7 year trend of reduction.
Source: Begbies Traynor, Red Flag Alert, July 2017