Nearly 500,000 UK businesses face ‘significant’ distress

Almost half a million businesses in the UK are in significant financial distress, the highest number on record, according to Begbies Traynor, the insolvency firm.

Data from the restructuring specialist found that businesses outside London in particular had shown signs of financial difficulties, raising additional questions for Boris Johnson’s government as it talks about ‘levelling up’ growth in the regions.

Although almost 126,000 London businesses exhibited signs of significant distress, according to Begbies, more than 358,000 businesses in other UK regions were struggling.

Begbies defines “significant distress” as those businesses with minor county court judgments claiming for debt repayments of less than £5,000, or those which have been identified by a credit risk scoring system that analyses financial ratios and indicators including working capital, contingent liabilities, retained profits and net worth.

“This latest data . . . suggests that UK businesses are continuing to struggle as the economy slows,” said Ric Traynor, executive chairman of the Manchester-based group. “If this trend of rising significant distress continues we could, for the first time, witness financial distress creeping over the half million milestone.”

The findings were released days before the Bank of England sets interest rates on Thursday. Last week a key business activity survey found the majority of companies were reporting expanding activity. However Britain’s retail sector has endured its longest spell of no growth since comparable records began in 1957.

Begbies found that the number of businesses in significant financial distress rose to 494,000 in the last quarter of 2019, compared with 481,000 in the same period the previous year.

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Of the 22 sectors monitored by Begbies Traynor, 15 saw increased levels of significant financial distress between the third and fourth quarters of 2019. Younger companies, formed after 2014, were more likely to have issues.

The rise in companies reporting difficulties was spurred by problems in the real estate and property, support services, construction and retail sectors in particular. Numbers of businesses in significant distress have risen 81 per cent since the start of 2016.

Julie Palmer, partner at Begbies Traynor, said: “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. These figures clearly demonstrate the impact of this indecision.”

The numbers of real estate and property businesses in significant distress rose 13 per cent in the year to 53,000. The insolvency firm’s data showed that property investors were particularly struggling, with a 30 per cent rise in companies in distress to 15,033. Begbies said that this reflected falling construction output, and election and Brexit uncertainty.

About 7 per cent more companies involved in the construction sector suffered significant financial distress when compared with the last quarter of 2018.

There was only a modest rise in the number of retailers in distress since the last quarter of 2018, rising 2 per cent to 31,615, but online retailers have started to be hit harder, with an 8 per cent year-on-year increase.



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