UK businesses in significant distress up 40% since Brexit referendum – report

The number of UK businesses in significant financial distress has soared 40% in the three years since the EU referendum, according to a report.

Insolvency specialists at Begbies Traynor said 489,000 companies are now in significant distress, with property, construction, retail and the travel sectors suffering hardest – an increase of 22,000 since the same time last year.

It comes at a difficult time for businesses, with many complaining that they are being left in the dark over what happens next in the Brexit process.

Several big-name companies have failed in recent years, including Toys R Us, Carillion and Thomas Cook, with others said to be struggling as big spending decisions are put on hold.

Julie Palmer, partner at Begbies Traynor, said: “With a considerable increase in the number of businesses suffering significant financial distress in the last three years there is growing frustration among businesses that they cannot plan for the future and the whole economy is lagging as a result.

“Much investment is on hold as businesses have their hands tied by not knowing what the state of play will be post-Brexit and whether the agreements or contracts they currently have in place will still be valid following the expected withdrawal, which is contributing to stifled growth nationwide.”

The firm’s Red Flag research also found significant financial distress has increased in 20 out of the 22 sectors monitored, with an 8% rise in the number of businesses considered “critical” compared with last year.

Property and real estate businesses are suffering particularly hard, with a 16% increase in the number of companies in significant financial distress in the third quarter of the year – the highest year-on-year increase across any sector measured by the research.

Carillion crisis
Construction firm Carillion was one of several big-name businesses to go bust since the EU referendum (Pat Hurst/PA)

One of the major causes is the large amounts of cash needed in the sector – something investors are particularly avoiding due to so much uncertainty.

Retail also suffered, with online stores finding trading hard going. According to Begbies, there are now 28% more retailers in significant distress compared with a year ago.

Online retailers – typically seen as a safe haven in the sector – also saw a 10% increase in their number now classed in significant distress compared to a year ago, with Begbies warning that the downturn is no longer just isolated to the high street.

In leisure and travel the number of businesses in significant financial distress rose 7% to 5,230 compared with last year and other sectors reliant on consumer spending have also been hit by reduced consumer confidence, including sport and health clubs, leisure and cultural activities.

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