London and the South East is home to more than 63,000 distressed businesses in need of turnaround support, according to The Institute for Turnaround (IFT), the UK’s leading membership organisation for turnaround experts.
Its members and corporate partner organisations help underperforming businesses avoid unnecessary insolvency, saving in excess of 80,000 jobs last year as initiatives to fix finances and revamp growth strategies bore fruit. Members also helped UK companies deliver more than £3.6 billion in shareholder value.
The IFT’s latest Societal Impact Report found that 63,620 businesses are struggling in the region – representing over 4 per cent of companies and the highest number in England, Scotland and Wales, according to data from Companies House. The report also says that inflationary pressures, labour shortages and rising interest rates and energy prices mean demand for turnaround expertise will continue to grow in 2023.
Last year manufacturing, technology and construction saw the largest increase in the number of firms in distress. The retail, automotive and casual dining sectors are forecast to be among the hardest hit as consumers tighten their belts this year, with manufacturing expected to remain the sector most in need of turnaround support.
Andy Leeser, chairman of the IFT, said, “This region is the powerhouse of the UK economy and it is concerning, but perhaps not surprising, that more than 63,000 of its businesses are in a state of distress.
“The directors behind UK businesses large and small, having risen to the manifold challenges of the COVID-19 pandemic and associated lockdowns might have expected a period of calm to recover and rebuild. Instead, firms have found themselves faced with multiple new challenges.
“A cost of living crisis is hitting consumers, whilst a cost of doing business crisis is combining with pre-existing stresses to put a great deal of pressure on UK PLC.”
Whilst it is true that inflation is predicted to continue falling from likely peaks reached towards the end of 2022, it is still expected to end the year well above the Bank of England’s two per cent inflation target. Borrowing costs, and borrowing conditions, will most likely remain challenging. Rising prices and wage pressures, a major feature of the business environment of 2022,will also remain big headwinds for business in 2023.
All these factors are still working their way through to the balance sheets of UK businesses, with much of the consequences still to be felt.
Despite the distinct benefits turnaround experts can bring, many companies remain reluctant to appoint a turnaround adviser until cash flow pressures are extreme, which can limit the range of restructuring options available.
The challenges and risks identified in the report, in addition to the uptick in fortunes experienced by businesses that engage short term professional expertise suggests that UK businesses suffering stress should act now to engage accredited turnaround support.