Mon, 22 Jul 2024 | BUSINESS NEWS
A new report has revealed a considerable increase in the number of UK businesses facing financial distress, with companies continuing to struggle in spite of gradual improvement in the UK economy.
According to the latest Red Flag Alert from Begbies Traynor, there were 601,950 UK businesses in “significant” financial distress during the second quarter of 2024. This represented an increase of nearly 10 per cent from the previous quarter, when 554,554 UK companies were in “significant” financial distress.
Ongoing weak consumer confidence was seen as being among the major drivers behind the increase, with financial distress rising sharply in many consumer-facing sectors, including travel and tourism (up 20.1 per cent), hotels and accommodation (up 16.4 per cent) and bars and restaurants (up 12.2 per cent).
The top five sectors for “significant” financial distress were: construction (89,824 companies); support services (89,763 companies); real estate and property services (65,919); professional services (50,683); and general retailers (42,992).
The latest data again reiterates the fact that, despite the UK economy having stabilised considerably over recent months, hundreds of thousands of businesses remain at serious risk of insolvency.
According to a CEBR report from earlier this year, insolvencies will continue to rise during 2024, with the think tank saying that there is approximately an 18-month lag between economic improvement and a drop in insolvencies. This means that it could be well into 2025, at the earliest, before the recent improvements in the UK economy are felt by struggling business and translate into lower insolvency figures.
This point was emphasised by Begbies Traynor Executive Chairman Ric Traynor, who said that, despite “a greater sense of optimism" in parts of the UK economy, “this is yet to translate into anything meaningful for the hundreds of thousands of businesses fighting for survival.”
He continued: "The situation for many British firms remains grave, with the latest Red Flag Alert data highlighting a substantial increase in the number of businesses in significant financial distress in comparison to this time last year.”
Traynor did say that the recent election had delivered “some political certainty [...] which should result in some momentum starting to build this summer” and that falling inflation would be helpful to businesses, “particularly if interest rates begin to inch backwards later this year.”
However, he conceded that “the prevailing economic situation means that we still expect to see heightened levels of company insolvencies extend into 2025 and beyond."
Begbies Traynor partner Julie Palmer stated that, six months into the year, there were “clear signs that financial distress is growing across almost every sector”, with businesses particularly struggling in consumer-facing industries.
Palmer said that, despite falling inflation, consumers “simply aren't behaving like they used to”, leading to significant challenges for businesses already struggling with higher costs, wage increases and the impact on trading resulting from “one of the wettest summers on record”.
She added: "Additionally, the situation for the consumer remains very precarious. The latest figures from the Bank of England highlights how more than three million households will come off their fixed rate mortgages over the next two years - resulting in substantially higher repayments for many - which will in turn act as a drag on disposable incomes."
Click here to download our free guide on finding and buying distressed businesses and assets
For sale is a long-established tree surgery and arboricultural services business with an excellent reputation, serving both domestic and commercial sectors across Southern England, including the Home Counties and London.
An opportunity has arisen to acquire a mechanical engineering company specialising in the Water Industry. Benefitting from over 3 decades of trading, this business has built a solid and long standing client base comprised of prominent UK utility comp...
An opportunity has arisen to acquire a reputable IT support and development services provider with a UK-wide client base and a proven record for innovation and resilience in the constantly evolving IT sector. Throughout its 25+ year trading history,...
25
|
Apr
|
Scaffolding company Hi-Point Access raises funds following Gap acquisition | BUSINESS SALE
Sheffield scaffolding company Hi-Point Access has secured &p...
24
|
Apr
|
Malaysia's IJM buys a stake in London construction firm JRL | BUSINESS NEWS
IJM Corporation Berhad has bought a 50% stake in Borehamwood...
24
|
Apr
|
Training group Babington bought by PE-backed Knovia | BUSINESS SALE
Apprenticeship and training provider Babington has been acqu...
25
|
Apr
|
Scaffolding company Hi-Point Access raises funds following Gap acquisition | BUSINESS SALE
Sheffield scaffolding company Hi-Point Access has secured &p...
24
|
Apr
|
Red Blaze chooses employee ownership | BUSINESS SALE
Twigworth, Gloucester-based events business Red Blaze has tr...
24
|
Apr
|
Training group Babington bought by PE-backed Knovia | BUSINESS SALE
Apprenticeship and training provider Babington has been acqu...
Business Sale Report is the complete resource for finding genuine acquisition opportunities.
Join today to receive:
All this and much more, including the latest M&A news and exclusive resources
Please choose your settings for this site below. For more information please read our Cookie Policy
These cookies are necessary for our website to function properly and provide you with access to all features.
These are analytics cookies that help us to improve the way our website works.
These are used to improve the functional performance of the website and make it easier for you to use.