Number of UK firms in ‘significant distress’ rises
The number of UK businesses facing “significant distress” has increased as consumer spending slumps due to ongoing uncertainty.
In total, 14 per cent of all UK businesses – 484,000 – said they were experiencing significant distress at the end of June, with the leisure and retail industries hit the hardest.
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The number of firms reporting critical financial distress also rose by five per cent year-on-year. Corporate restructuring specialist Begbies Traynor said critical distress is often a precursor to formal insolvency.
The average debt of insolvent companies has more than doubled from £29,873 in 2016 to £66,226, according to Begbies Traynor’s Red Flag Alert index for the second quarter.
Hotels and accommodation, sports and health clubs, leisure and culture activities and the online retail sector all saw an increase in financial distress.
Meanwhile, businesses indirectly reliant on the health of the consumer economy were also affected by the slump in spending.
Real estate and property companies saw a 15 per cent increase in the number of companies in significant financial distress.
Begbies Traynor partner Julie Palmer said: “This latest Red Flag Alert demonstrates the ongoing impact of economic and political uncertainty within the UK.
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“While consumer spending has historically driven the UK economy, the latest figures demonstrate that falling spending is now clearly having an impact.
“This economic stagnation is stifling both business and consumer activity and could leave companies vulnerable unless certainty is restored so that consumers and businesses have the confidence to start spending again.”