New data reveals that UK companies are bracing themselves for a difficult 2016, after finishing 2015 in a challenging financial state, warns Begbies Traynor, the UK’s leading independent insolvency firm.
According to Begbies Traynor's Red Flag Alert research for Q4 2015, which monitors the financial health of UK companies, 268,898 UK companies closed the year suffering ‘Significant’ financial distress; a 17% increase compared to the same period in the prior year (Q4 2014: 229,232 companies) and the most marked annual rise in distress since Q2 2014.
The research reveals that all sectors of the economy saw an increase in financial distress over the past 12 months. Worryingly, the worst performing sectors were those that are most influential to the UK’s economic growth, with 58,955 Services companies, 12,418 Manufacturers, 41,373 Consumer businesses and 50,122 Construction & Real Estate firms now experiencing ‘Significant’ financial distress, up 19%, 18%, 18% and 17% respectively year on year.
Begbies Traynor’s analysis chimes with George Osborne’s warning last week that Britain faces a “dangerous cocktail” of global risks that could place the UK’s economic recovery in danger, adding that the country needs to be “shaken” out of its complacency.
Julie Palmer, Partner at Begbies Traynor, says:
“Despite an improving economy, 2015 showed no shortage of challenges for UK businesses, with a slowdown in China and collapsing oil and commodity prices leading to stock market turmoil during the second half of the year. At the same time, manufacturing weakened significantly as a result of continued sluggish growth in Europe, while labour shortages and building materials inflation continued to plague the construction sector.
“With so many companies beginning the New Year in an unfavourable financial state and even the Chancellor predicting black clouds on the horizon, 2016 looks set to be another challenging twelve months for UK corporates.”
Ric Traynor, Executive Chairman at Begbies Traynor says:
“Struggling businesses should not expect any respite in 2016, with the UK economy facing greater headwinds this year from slow global growth, lower levels of business investment and the highest levels of consumer debt seen for five years. Meanwhile the looming EU referendum, potential interest rate rises, and additional cost pressures, including the introduction of the new National Living Wage in April, give cause to yet more uncertainty for UK businesses over the coming months.
“A proactive, not reactive, approach will be crucial to businesses’ financial strength in 2016, both in terms of managing their cost bases while also driving expansion in a low growth environment.”
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