Nearly half a million businesses across the country ended 2017 in a state of 'significant' financial distress, a third more than at the same point in 2016, according to research from Begbies Traynor
The firm’s Red Flag Alert for Q4 2017 found 493,296 businesses were experiencing 'significant' financial distress, up 36% compared to the same period last year (Q4 2016: 361,856) and 10% higher than the previous quarter (Q3 2017: 448,011).
The data suggests 258,349 UK businesses ended the year in a position of negative net worth, while a further 154,251 demonstrated a worrying increase in their working capital deficit.
'Significant' distress levels rose across every sector and region of the UK over the past 12 months. Support services was the worst performing sector by volume, with 121,095 businesses showing signs of financial difficulty at the end of 2017, up 43% on last year.
Over the same period, financial distress in the UK construction industry grew 31% impacting 62,294 firms, while 'significant' financial distress in the real estate sector increased by 46%, hitting 40,508 companies. These three sectors alone made up 45% of all UK businesses in 'significant' financial distress.
Geographically, the region with the most affected businesses was London, where 121,528 companies ended the period in a state of 'significant' financial distress, up 13% on Q4 2016; representing 25% of businesses in distress nationally.
Julie Palmer, partner at Begbies Traynor, said: ‘A perfect storm of macroeconomic headwinds pushed nearly 500,000 firms into significant distress. Our data shows that no region or industry has entered the New Year unaffected, as the whole economy felt the combined drags of the inflationary environment, higher interest rates, growing business uncertainty, tighter credit availability and subdued consumer spending.’
Ric Traynor, executive chairman of Begbies Traynor, said: ‘Looking forward, UK growth is widely expected to be sluggish again in 2018, so it's important that companies focus on staff engagement and business efficiency, in line with the government's push for productivity this year.
‘For the thousands of businesses now showing signs of financial ill health, prudent cost management, sustained improvements in productivity, and finding innovative ways to stay ahead of the competition will be critical to surviving beyond the next 12 months.’
Report by Pat Sweet
