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Julie Palmer

Business Health Statistics

| April 20th 2015

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Election uncertainty stalls business growth as investment dries up

Latest Red Flag Alert Report for Q1 2015

Financial distress levels plateau as UK businesses hold back growth until after election

Businesses across the UK have battened down the hatches since the start of the year, holding back investment for growth and initiating recruitment and pay freezes as they await the outcome of May’s General Election, resulting in a state of stagnation across all areas of the economy, warns business recovery specialists Begbies Traynor.

According to Begbies Traynor's Red Flag Alert research for Q1 2015, which monitors the financial health of UK companies, levels of ‘Significant’ financial distress fell just 1% over the past three months to 227,993 businesses (Q4 2014: 240,685), while levels of more severe ‘Critical’ distress increased slightly by 4% to 2,461 failing companies (Q4 2014: 2,362); the first increase in this category since Q2 2014. 

London was the only region to experience any real improvement in financial distress levels over the period, with ‘Significant’ distress falling 4% in the quarter to 36,788 businesses (Q4 2014: 38,141), compared to a flat picture across the rest of the country.

Julie Palmer, Partner at Begbies Traynor, said:

“Concerns over the outcome of the most uncertain election in a generation have led to a state of stagnation across all sectors of the economy, as swathes of UK businesses guarded against the worst case scenario by postponing their growth plans until after the results have been announced.

“With economic forecasters predicting that elevated political uncertainty would result in subdued consumer confidence, sharp swings in the value of the pound and rising volatility in the equity markets, many business leaders took the decision at the start of the year to cut back on much needed investment, new hires and pay increases to provide a buffer in the event that trading levels subsided.”

Ric Traynor, Executive Chairman of Begbies Traynor Group, concluded:

“In reality the election has had a minimal impact on trading volumes so far, suggesting that many businesses may have missed out on significant growth opportunities over the first quarter by being overly cautious. But as the election draws nearer, levels of political uncertainty are finally catching up with expectations and it is now too late in the day for businesses to revert back to growth mode. 

“With little separating the two main parties in the polls, the likelihood of an inconclusive result on 7 May is higher than ever. If so, this could result in the formation of a new coalition, the drafting of an emergency Budget and potentially an additional month of uncertainty, therefore restricting new investment until June or beyond and putting the economy and UK businesses at risk of slower growth.”

Critical problems by Sector:

Sector

Q1 2014

Q1 2015

Percent change

Q4 2014

Q1 2015

Percent change

Automotive

90

89

-1%

82

89

9%

Bars & Restaurants

145

108

-26%

138

108

-22%

Construction

534

438

-18%

375

438

17%

Financial Services

58

63

9%

63

63

0%

Food & Bev Mfr Beverage Mfrg

24

18

-25%

12

18

50%

Food Retailing

54

45

-17%

39

45

15%

General Retail

159

131

-18%

133

131

-2%

Hotels

32

27

-16%

34

27

-21%

Ind Transport & Logistics

68

45

-34%

53

45

-15%

Leisure

33

24

-27%

18

24

33%

Media

59

45

-24%

45

45

0%

Other Mfrg

226

153

-32%

155

153

-1%

Others

140

113

-19%

88

113

28%

Printing & Packaging

20

22

10%

17

22

29%

Professional Services

79

51

-35%

69

51

-26%

Real Estate

233

201

-14%

194

201

4%

Sports & Recreation

29

23

-21%

16

23

44%

Support Services

177

143

-19%

146

143

-2%

Telecoms & IT

92

73

-21%

73

73

0%

Travel & Tourism

39

42

8%

28

42

50%

Uncoded   

671 

507 

-24% 

509 

507 

0%

Utilities

4

6

50%

5

6

20%

Wholesaling

97

94

-3%

70

94

34%

All Sectors

3,063

2,461

-20%

2,362

2,461

4%

Critical problems by Region:

Region

Q1 2014

Q1 2015

Percent change

Q4 2014

Q1 2015

Percent change

East of England

269

210

-22%

213

210

-1%

London

499

435

-13%

423

435

3%

Midlands

430

341

-21%

282

341

21%

North East

86

60

-30%

54

60

11%

North West

343

295

-14%

283

295

4%

Nrthn Ireland

37

36

-3%

47

36

-23%

Scotland

135

101

-25%

106

101

-5%

South East

728

521

-28%

554

521

-6%

South West

181

170

-6%

155

170

10%

Uncoded 

11 

12 

9% 

12 

33% 

Wales

104

103

-1%

68

103

51%

Yorkshire & Humberside

240

177

-26%

168

177

5%

All Regions

3,063

2,461

-20%

2,362

2,461

4%

Julie Palmer

About the author

Julie Palmer

Regional Managing Partner

Meet our Team of Experts

Julie is a law graduate who qualified with Price Waterhouse in 1994. Julie joined Smith & Williamson in 1997 and became a partner in 2001. With Mike Stevenson, Julie set up Middleton Partners offices in Salisbury and Southampton, both of which are now part of Begbies Traynor.

Julie is a member of the Insolvency Practitioners Association and the None Administrative Receivers Association and is a Fellow of The Association of Business Recovery Professionals. Julie deals with all aspects of Corporate Recovery and turnaround work and takes all form of personal insolvency appointments.

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