Brexit uncertainty is increasing financial distress for firms, with businesses in the property sector taking the worst hit
The health of UK companies significantly deteriorated in the first quarter, with businesses in the property sector in particularly bad shape.
Data from Begbies Traynor found that at the end of March, 484,000 business were in significant financial distress amid current economic uncertainty.
The number of businesses in “critical” financial distress, often those verging on insolvency, surged by 17% year on year.
Property was the worst-hit sector for the second quarter running, amid a fall in the number of people making big-ticket purchases including new homes.
The number of significantly distressed companies in the property sector jumped by 13% to 48,182 for the quarter, from 42,512 in the same period the previous year.
House prices fell in England for the first time since 2012 in the three months to March 2019, as Brexit uncertainty put off potential home-buyers.
Within the sector companies involved in buying, selling and letting properties took the biggest hit, with a 16% rise in the number in significant distress.
The construction sector also struggled, with the number of significantly distressed involved in building projects rising 10% to 13,018 for the period.
Financial services saw a 5% increase in the number of businesses in significant distress to 12,728, as it was particularly affected by the lack of clarity regarding the UK’s exit from the EU.
The leisure and culture sectors also suffered, reporting 9% and 4% rises in the number of affected businesses respectively.
Julie Palmer, partner at Begbies Traynor, said many UK businesses are currently in limbo and deferring major investment decisions. This, combined with consumers holding back on big-ticket purchases, has resulted in increasing significant distress across many sectors.
Executive chairman of Begbies Traynor Group, Ric Traynor said they have heard from businesses that Brexit uncertainty has been a hindrance to business growth and investment.
There has already been a number of high-profile firms announcing their decision to invest in other countries, which not only impacts regional economies, but also the SME supply chain.
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