TIDMBEG
Begbies Traynor Group PLC
30 January 2017
30 January 2017
FINANCIAL DISTRESS EDGES UP AS ECONOMY PREPARES FOR AN UNCERTAIN
YEAR AHEAD
276,518 UK businesses finished 2016 in a state of 'Significant'
financial distress, 91% being SMEs
New research from Begbies Traynor, the UK's leading independent
business recovery practice, shows that more than 275,000 companies
were showing signs of "significant" financial distress at the close
of 2016, representing the thirteenth consecutive quarter that
corporate stress has risen on a year on year basis.
According to Begbies Traynor's Red Flag Alert research for Q4
2016, which monitors the financial health of UK companies, 276,518
businesses were experiencing 'Significant' financial distress at
the end of 2016; an increase of 3% compared to the same period last
year (Q4 2015: 268,898 companies). On an annualised basis, the last
time that 'Significant' distress fell year on year was in Q3
2013.
Of the companies experiencing financial distress during Q4 2016,
91% (254,857) were SMEs, indicating the scale of the problems faced
by the UK's smallest businesses. Meanwhile, nearly a quarter (23%)
of the country's struggling businesses were in London, where 64,764
companies finished the year in a state of 'Significant' financial
distress; an increase of 5% on Q4 2015.
This rising distress comes at a time when the number of UK
company incorporations is growing substantially, with more than
685,000 start-ups joining the economy during 2016 alone - the
highest level since the start of the financial crisis in 2007.
However, Begbies Traynor highlights that many of these start-ups
are short lived 'lifestyle' businesses often forced upon people by
changing circumstances, such as the loss of paid employment. For
example, of the c.470,000 companies incorporated during 2011,
almost 57% have since been dissolved, struck off or have entered
formal insolvency procedures, and another 7.5% are not even
trading.
Julie Palmer, Partner at Begbies Traynor, says:
"With the World Bank revising down its growth forecasts for the
UK, alongside reports that the UK's trade deficit widened to a
worse-than-expected GBP12.2bn in November, our data shows that
levels of financial distress continue to rise across the country,
most of all within the UK's important SME community, which is
widely regarded as the lifeblood of the economy.
"The scale of SME distress at the end of 2016 just goes to
highlight the fragility of UK micro businesses, many of which are
underfunded, lack management experience or are flawed in concept.
Although record numbers of new start-ups continue to join the
economy each year, a large proportion don't stay in business for
long, with growing numbers of aspiring entrepreneurs returning to
more established businesses as soon as the opportunity arises."
Ric Traynor, Executive Chairman of Begbies Traynor, added:
"Despite finishing the year in a state of heightened financial
stress, it is too early to say that this is reflective of an
underlying problem that is likely to continue or negatively impact
2017, as numerous macro indicators suggest that the New Year has
got off to a reasonable start.
"EU exit negotiations and US trade policy could be major factors
affecting business this year either for better or worse whilst
rising inflation and fluctuating exchange rates are likely to have
a negative impact. Either way 2017 could well be a defining year
for UK business."
- Ends -
For further information, contact:
MHP Communications
Katie Hunt / Giles Robinson / Hannah Winter / Kirsty Wilson /
Peter Lambie
Tel: 0203 128 8788
Email: Begbiescorporate@mhpc.com
About Red Flag Alert
Red Flag Alert has been measuring and reporting corporate
financial distress since 2004, and over that time has become an
industry benchmark of the underlying health of companies across
every sector and region of the UK.
Through its unique algorithm, the Red Flag Alert measures
corporate distress signals, drawing on factual legal and financial
data from a wide range of relevant sources, including intelligence
from the UK's leading insolvency business, Begbies Traynor.
The release refers to the numbers of companies experiencing
'Significant' problems, which are those with minor CCJs (of less
than GBP5k) filed against them or which have been identified by Red
Flag's proprietary credit risk scoring system which screens
companies for a sustained or marked deterioration in key financial
ratios and indicators including those measuring working capital,
contingent liabilities, retained profits and net worth.
Red Flag Alert is commercially available to all businesses, on
an annual subscription basis, to help them better understand risk
and exposure and help prepare them for the future. Further
information about Red Flag Alert can be found at:
www.redflagalert.com
About Begbies Traynor Group
Begbies Traynor Group plc operates from over 40 UK locations
through two operating divisions:
Begbies Traynor is the UK's leading independent business
recovery practice handling the largest number of corporate
appointments, principally serving the mid-market and smaller
companies. We provide a range of specialist professional services
primarily to businesses, their professional advisors and the major
banks covering insolvency, restructuring and risk management
activities.
Eddisons is a leading UK firm of chartered surveyors, offering a
wide range of specialist services to banks, insolvency
practitioners, and owners and occupiers of commercial property. The
core services offered are valuation and disposal of property
including fixed charge property receiverships; valuation and
disposal of machinery and business assets; auctions; insolvency
insurance brokerage; property and facilities management; and
building consultancy and ratings valuations.
Information on Begbies Traynor Group can be accessed via the
Group's website at www.begbies-traynorgroup.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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