New data from insolvency firm Begbies Traynor reveals the number of UK businesses in significant financial distress has risen to 494,000 – the highest number recorded by its ‘Red Flag Alert’ research. Property, support services, construction and retail are the sectors most badly affected.
The data for the fourth quarter of 2019 means the number of businesses in significant distress has risen by 81% since the start of 2016. A considerable number of these companies were formed after 2014, demonstrating that younger businesses are some of the most vulnerable to failure.
Julie Palmer, Partner at Begbies Traynor, commented: “Businesses and the UK economy as a whole will want to avoid a repeat performance of 2019, where distress increased to record levels on the back of ongoing uncertainty around Brexit. These figures clearly demonstrate the impact of this indecision, and with political certainty and a clear Brexit path, UK businesses should, at last, be able to plan for 2020 with a greater sense of clarity.”
After a difficult Christmas trading period, there was a 2% year-on-year increase in the number of retailers in significant distress, to 31,615. The malaise has also hit online retailers, with an 8% year-on-year increase in the number of these retailers facing significant financial distress, to 9,117. Begbies Traynor stated that this demonstrates that a web-based offering is no silver bullet for business performance.
Palmer said: “The landscape of UK business is slowly changing. In order to capture the attention of consumers, businesses need to demonstrate that they not only have a compelling product or service at the right price but also one that has strong environmental credentials to boot … The key for businesses will be to keep up with this trend and understand the modern demands of the consumer.”
She concluded: “Businesses will be hoping that the next budget will also give them some respite with a cut in business rates. If that happens, the question for businesses in 2020 will be whether they can adapt to the new climate they now find themselves in and invest wisely to restructure and reinvigorate their organisation where needed.”
NAM Implications:
- If in any doubt, download a copy of your customer’s latest annual report…
- …and conduct a ‘what-if’ on them going bust…
- …and calculate the incremental sales required to replace your current amount of credit outstanding.
- i.e. divide current credit to your customer by your net profit margin and multiply by 100 = incremental sales required.
- Then take a stiff drink and see your credit control colleagues…
