UK businesses across nearly every sector of the economy including professional services are showing positive signs of stability following the EU referendum, according to research from Begbies Traynor
The firm’s quarterly Red Flag Alert research for Q3 2016, which monitors the financial health of UK companies, shows that in the three months following the EU referendum, levels of ‘significant’ financial distress among UK businesses fell.
The data indicates levels of ‘significant’ distress were down by 6% during the past three months, from 263,517 struggling businesses in Q2 2016 to 248,916 companies in Q3 2016. The majority (92%) of these companies were SMEs.
Meanwhile, year-on-year the number of UK businesses suffering ‘significant’ financial distress fell 2% across the economy as a whole.
Confidence at professional services firms - accounting, law and management consulting - has also improved in Q3 2016 with the number of companies experiencing significant financial distress down 10% to 11,745 companies, compared with around 13,000 in the April to June period of 2016. This is the most improved sector after consultancy.
Palmer said: ‘Professional services firms have been in high demand following the referendum result, contributing to lower financial distress across the sector.
'Law firms and management consultancies are benefitting most thanks to an influx of new projects from clients looking for help in navigating the current Brexit uncertainty and the potential legislative changes that may come into force once the UK leaves the EU.
‘However, challenges still remain for the sector over the long term, as any negative impact on the UK economy following a Brexit deal could dampen future transactional activity – one of the most lucrative sources of income for many large professional services firms.’
Ric Traynor, executive chairman at Begbies Traynor, said: ‘Overall, the UK economy appears to be in a stronger position than expected following the EU referendum result.
‘While we wait to see whether the government opts for a “hard” or “soft” Brexit strategy, businesses at least appear to be better placed to tackle any new challenges on the horizon ahead of the government’s imminent negotiations.’
According to Begbies Traynor’s research, the most marked improvement in financial health during Q3 2016 was within the UK construction sector, where the number of companies experiencing ‘significant’ distress fell by 11% to 28,917 (Q2 2016: 32,311 companies).
Julie Palmer, partner at Begbies Traynor, said: ‘UK construction firms appear to be bouncing back after the initial Brexit shock, when in July construction activity initially shrank at its fastest pace since 2009.’
