The number of UK businesses in “critical” financial distress jumped 17 per cent over the year to the end of March, with a significant deterioration seen in the first quarter of 2019 as Brexit uncertainty continues.
Research by insolvency firm Begbies Traynor found that almost half a million businesses – one in seven of all UK companies – were in significant financial distress in the first three months of 2019.
The number of significantly distressed companies in the property sector jumped by 13 per cent to 48,182 for the quarter, from 42,512 in the same quarter in 2018.
Property was the worst-hit sector for the second quarter in a row, affected by prospective purchasers holding off making big purchases including new homes.
House prices fell in England for the first time since 2012 in the three months to March 2019, headed up by London and the southeast.
Prospective buyers have refrained from entering the market due to Brexit, according to estate agents, whilst increased tax on buy-to-let investments have continued to dampen demand.
Julie Palmer, a 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.”
Companies involved in buying, selling and letting properties took the biggest hit, with a 16 per cent rise in the number in significant distress.
The construction sector saw a 10 per cent rise to 13,018, while the financial services, leisure and culture industries also suffered.
Also, we have also seen how the retail sector has been hit, with a number of high-street giants such as Debenhams and House of Fraser go into Administration.
Meanwhile, business investment fell for a fourth consecutive quarter in the final three months of 2018 – the first time this has happened since the economic downturn of 2008-09.
As we’ve been saying for sometime, however we exit the European Union, the UK cannot escape unscathed. A “divorce” of this magnitude is bound to affect the stability of the economy with so many elements being affected. Areas that are heavily funded by the EU include agriculture, road and railway infrastructure, renewable energy and education, to name but a few. It is to be hoped that the negative impact of Brexit proves rejuvenating to stagnant UK economy.