More firms in financial distress, says Begbies Traynor

More than 275,000 companies were showing signs of ‘significant’ financial distress at the close of 2016, according to new research by Begbies Traynor.

The independent business recovery practice said this represented the 13th consecutive quarter that corporate stress had risen on a year on year basis.

Begbies Traynor’s latest Red Flag Alert research showed that 276,518 businesses were experiencing ‘significant’ financial distress at the end of 2016 – 3% up on the corresponding period in 2015.

On an annualised basis, the last time that ‘significant’ distress fell year on year was in Q3 2013.

Of the companies experiencing financial distress during Q4 2016, 91% (254,857) were SMEs.

Nearly a quarter (23%) of the country’s struggling businesses were in London, where 64,764 companies finished the year in a state of ‘significant’ financial distress – an increase of 5% on Q4 2015.

Begbies Traynor partner Julie Palmer said: “With the World Bank revising down its growth forecasts for the UK, alongside reports that the UK’s trade deficit widened to a worse-than-expected £12.2bn in November, our data shows that levels of financial distress continue to rise across the country, most of all within the UK’s important SME community, which is widely regarded as the lifeblood of the economy.

“The scale of SME distress at the end of 2016 just goes to highlight the fragility of UK micro businesses, many of which are underfunded, lack management experience or are flawed in concept.

“Although record numbers of new start-ups continue to join the economy each year, a large proportion don’t stay in business for long, with growing numbers of aspiring entrepreneurs returning to more established businesses as soon as the opportunity arises.”

Executive chairman Ric Traynor said: “Despite finishing the year in a state of heightened financial stress, it is too early to say that this is reflective of an underlying problem that is likely to continue or negatively impact 2017, as numerous macro indicators suggest that the New Year has got off to a reasonable start.

“EU exit negotiations and US trade policy could be major factors affecting business this year either for better or worse whilst rising inflation and fluctuating exchange rates are likely to have a negative impact.

“Either way 2017 could well be a defining year for UK business.”

Story provided by StockMarketWire.com