UK corporate financial health deteriorates since Article 50 was triggered

Study finds

New research today reveals that thousands of UK businesses have experienced a deterioration in their financial health since Article 50 was triggered a little over a year ago, with increased levels of financial distress being seen across all sectors and regions of the UK.

According to Begbies Traynor’s Red Flag Alert research for Q1 2018, which monitors the financial health of UK companies, 477,210 businesses were experiencing ‘Significant’ financial distress at the end of March 2018, up 33 per cent compared to when Article 50 was triggered on 29 March last year (Q1 2017: 358,943).

While ‘Significant’ distress rose across every sector and region of the UK over the past 12 months, the sectors with the largest volumes of businesses in distress were Support Services (115,249 companies, up 40 per cent year on year), Construction (60,541, up 26 per cent), Real Estate & Property (41,624, up 46 per cent) and Telecommunications (32,538, up 47 per cent). Regionally, London saw the largest increase in Significant distress, up 42 per cent, affecting 119,419 businesses in the Capital.

Other sectors that experienced large increases in financial distress over the period included Professional Services (up 46 per cent), Financial Services (up 45 per cent) and Automotive (up 15 per cent); a worrying trend given the importance of these industries in the Government’s negotiations over future trade deals.

According to the research, 255,131 UK businesses ended the period in a position of negative net worth1, while 110,266 demonstrated a considerable increase in their working capital deficit; both key indicators of financial distress.

Julie Palmer, Managing Partner at Begbies Traynor, said:

“While uncertainty around the outcome of the Brexit negotiations has undoubtedly had an impact on business confidence across the UK, the economy has also faced a wide range of unexpected headwinds which have dampened progress over the past year. Currency fluctuations, rising interest rates, subdued consumer spending and a cooling property market are just some of the factors that have combined with growing political uncertainty to push nearly half a million UK businesses into financial distress over the past 12 months.

 

“Should these headwinds continue, they could impact the Government’s bargaining power when it comes to negotiating new trade deals after the UK’s exit from the European Union, which would be a major concern.”