TIDMBEG
Begbies Traynor Group PLC
31 July 2017
BIGGEST INCREASE IN FINANCIAL DISTRESS AMONG UK COMPANIES IN
THREE YEARS
'Significant' financial distress up 25% year on year; the
biggest annual increase since 2014
New research from Begbies Traynor, the UK's leading independent
business recovery practice, shows that 329,834 UK companies were
experiencing "Significant" financial distress at the end of Q2
2017, a 25% increase from Q2 2016 (263,517 companies), representing
the largest annual increase since Q2 2014 and the largest number of
corporates experiencing significant distress in at least 5
years*.
The Red Flag Alert research for Q2 2017, which monitors the
financial health of UK companies, showed that SMEs made up the
majority of this increase, with 'Significant' distress rising 26%
to 308,423 businesses, while large companies saw distress rise by
just 12% year-on-year to 21,411 businesses at the end of Q2
2017.
Among the sectors facing the largest increases in 'Significant'
financial distress, property and construction saw substantial rises
of 32% and 22% respectively, with 28,259 real estate businesses (Q2
2016: 21,373) and 40,495 construction companies (Q2 2016: 33,222)
finishing the period in a state of 'Significant' financial
distress, providing further evidence of a slowdown in the UK
housing and construction markets.
Meanwhile, the research shows that the UK sectors most reliant
on consumer spending have been hit particularly hard during the
second quarter, with volumes of financial distress increasing
year-on-year by 22% among leisure businesses (Q2 2017: 8,206 vs. Q2
2016: 6,700), 17% for general retailers (Q2 2017: 25,598 vs. Q2
2016: 21,939), 17% for automotive companies (Q2 2017: 10,741 vs. Q2
2016: 9,161) and 16% among bars & restaurants (Q2 2017: 13,635
vs. Q2 2016: 11,793).
Ric Traynor, Executive Chairman of Begbies Traynor,
commented:
"Our Red Flag research shows that a recent loss of momentum in
the economy is putting increased financial pressure on UK
businesses, with SMEs bearing the brunt of this rising distress, as
businesses contend with uncertainty over Brexit negotiations and an
inconclusive election result, alongside rising costs.
"These significant increases in financial distress also point to
a slowdown in business investment at a time when the overall growth
rate of the UK economy remains stubbornly sluggish."
Julie Palmer, Partner at Begbies Traynor, says:
"While we are seeing rising levels of distress across all
corners of the UK economy, the quarterly deterioration in the
property and construction sectors is particularly concerning,
raising doubts over whether they have strong enough foundations to
cope with upcoming headwinds, from Brexit and the rising cost of
imported goods to the widening skills gap and its impact on labour
cost inflation.
"In the UK's consumer facing industries, weak real wage growth
and rising levels of personal debt continue to put a strain on the
retail, bars, restaurants and leisure sectors, where many
businesses have been reluctant to fully pass on the inflationary
impact of the weakened pound and higher staff costs from the
National Living Wage, for fear of losing customers on price in an
increasingly competitive marketplace.
"As the second half of 2017 begins, it's worrying that so many
businesses, particularly SMEs, are facing such instability. These
businesses, which are the backbone of our economy, need to be as
robust as possible to fuel the UK's growth post-Brexit, yet these
figures indicate that many will struggle to fund increases in
working capital and invest in growth."
- Ends -
For further information, contact:
MHP Communications
Katie Hunt / Giles Robinson / Hannah Winter / Alice Osborne /
Peter Lambie
Tel: 0203 128 8570
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
* The Red Flag Alert system was updated in 2012 to cover a
broader range of stress indicators and provide a much stronger
indication of the propensity to fail, amongst the UK's corporate
community. As such, the data is only comparable going back to Q3
2012.
About Begbies Traynor Group
Begbies Traynor Group plc is a leading business recovery,
financial advisory and property services consultancy, providing
services nationally from a comprehensive network of UK locations
through two complementary operating divisions.
Business recovery and financial advisory services
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.
BTG Financial Consulting provides transactional support,
valuations and advisory services.
We provide these services to businesses, professional advisors,
other stakeholders, investors and financial institutions, working
with all the major UK clearing banks.
Property services
Eddisons is a national firm of chartered surveyors, delivering
advisory and transactional services to owners and occupiers of
commercial property, investors and financial institutions. The
division includes Pugh & Co, the largest regional firm of
commercial property auctioneers by number of lots.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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