Confidential Advice Line: 0800 063 9221

UK corporate health deteriorates 9%

According to Begbies Traynor’s Red Flag Alert research for Q2 2018, which monitors the financial health of UK companies, 472,183 businesses were experiencing ‘Significant’ financial distress at the end of June 2018.
Business Health Statistics

| July 23rd 2018

More News by Julie Palmer

UK corporate health deteriorates 9%

According to Begbies Traynor’s Red Flag Alert research for Q2 2018, which monitors the financial health of UK
companies, 472,183 businesses were experiencing ‘Significant’ financial distress at the end of June 2018, up 9% compared to the same stage last year (Q2 2017: 434,492) but down 1% compared to the previous three months of the year (Q1 2018: 477,183).

Following a spate of positive economic updates over recent weeks, the Red Flag Alert data also reveals that
levels of financial distress are increasing at a slower rate year on year than during the previous four quarters (Q1 2018: +33%, Q4 2017: +36%, Q3 2017: +27%, Q2 2017: +25%), which could be a tentative sign of returning
stability across the economy.

The sectors with the highest number of businesses in distress year on year were Support Services (112,434, up
10%), Construction (60,208, up 4%), Real Estate (42,254, up 19%), Telecoms (31,770, up 9%) and General
Retailers (30,574, up 4%). However, on a quarterly basis, levels of ‘Significant’ distress across these key sectors
appear to have stabilised, fluctuating between ‐2% and +1% compared to the first quarter of 2018.

Regionally, businesses in the South of England continued to see the biggest deterioration in their financial health, with London being the UK’s worst performing region, where ‘Significant’ distress impacted 118,367 companies in the Capital alone (up 17% year on year, but down 1% compared to Q1 2018).

According to the research, 251,495 UK businesses ended the period in a position of negative net worth1, while
109,717 demonstrated a considerable increase in their working capital deficit; both key indicators of financial
distress.

Julie Palmer, Partner at Begbies Traynor, said:
“After a significant jump in financial distress during the first quarter of 2018, a period marred by weak consumer confidence, growing political uncertainty and the fallout from the ‘Beast from the East’, we may now be seeing tentative signs of stability returning to the UK economy in recent months.

“Although the volume of businesses in ‘Significant’ financial distress remains at relative highs after four
consecutive quarters of accelerating distress, the rate of deterioration in UK corporate health has slowed during Q2 2018, supported by recovering business and consumer confidence, higher levels of employment, and continued interest rate stability.

“Looking forward, while there’s a chance this positive trend could continue, the outlook for certain industries is looking increasingly uncertain. The problems facing high street retail have been well documented of late, with the recent epidemic of CVAs and store closures being just the tip of the iceberg. However, the UK Automotive sector looks to be most at risk in our view, facing job cuts and a slowdown in production output and investment, as industry pundits question how it will be able to compete with European competitors post Brexit.”

Ric Traynor, Executive Chairman of Begbies Traynor, commented:
“With snow grinding thousands of UK businesses to a halt back in March, the return of warmer weather in Q2
and a timely boost from the royal wedding in May helped the UK bounce back to growth in June, as our research and other key economic indicators point to a steadying business environment across the country.

“Stronger growth in the UK’s service sector, boosted by increased demand for financial services, combined with a surprise rebound in construction activity in June, which increased at its fastest level in seven months, are both clear bellwethers for a rebounding economy.

“However, with manufacturing growth down on last year, continued inflationary pressure, slowing wage growth and potential rate rises on the horizon, we’re not out of 24 July 2018 the woods yet. There still remains a heightened level of distress among UK businesses and the slight improvement in the second quarter could yet prove to be temporary.”


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 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.

55 Regional UK Offices

Find your local Begbies Traynor office and speak to an adviser today.

Find your Local Office
0800 063 9221

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0800 464 0871

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0161 837 1700

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
Gin festivals cancelled as organiser placed into administration
Begbies Traynor appointed as administrators of Gin Festival Limited
20 festivals planned for the coming months have been cancelled
Read More →
 
Join thousands of professionals by signing up for our updates
Analysis and Opinion from our Partners
Top Industry News
Register Now →
 

Advice you can trust

We are accredited by the following industry leading organisations

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland

Contact the Begbies Traynor team

or Find your Nearest Office

Here at Begbies Traynor Group we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY

Processing...