Thousands of UK firms fighting for survival - Begbies Traynor

(Sharecast News) - More than half a million UK business are fighting for survival, according to an industry research published on Friday, weighed down by the weak economy. According to the latest Red Flag Alert research from consultancy Begbies Traynor, the level of 'significant' financial distress surged by 30.8% year-on-year in the first quarter, with 554,554 companies affected.

All sectors covered have experienced growth in financial distress. However, the biggest rises were seen in construction, food and drug retailers, and general retailers, which reported jumps of 38.6%, 40.8% and 38.7% respectively.

Those in more serious 'critical' financial distress also surged, up 20.1%, with 40,174 firms affected.

Companies in 'critical' financial distress are at risk of entering insolvency over the next 12 months.

Julie Palmer, partner at Begbies Traynor, said: "Since the pandemic, hundreds of thousands of UK businesses depleted their financial reserves and loaded their balance sheets with increasingly unaffordable debt, which for many will be too great to bear."

"Many will be pinning their hopes on a meaningful cut to interest rates later this year, but the Bank of England continues to be hawkish."

She warned that "thousands" of business could potentially fail in the coming months.

Ric Traynor, executive chair of Begbies Traynor, added: "The considerable economic challenges facing many companies show no immediate sign of abating. The macroeconomic conditions that made last year so difficult have continued to exert unrelenting pressure on corporate balance sheets.

"Consequently, our Red Flag data show a marked increase in British firms moving towards insolvency compared.

"Growing geopolitical instability is compounding this problem and impairing the UK economy's ability to pick up some much-needed momentum post pandemic. The UK economy is in a precarious position, and further instability could cause fuel prices to rise, increasing inflation and slowing the appetite for interest rate cuts."

Begbies Traynor's Red Flag Alert research, which has been running since 2004, uses algorithms to measure corporate distress signals, including company accounts and other legal and financial data.