Financial distress on rise as thousands of firms show signs of difficulties

The health of UK companies deteriorated in the second quarter, with thousands of firms showing signs of financial difficulties.

Monday, 23rd July 2018, 5:03 pm
Updated Monday, 23rd July 2018, 5:04 pm
50,000 jobs have been lost so far in 2018 as retail workers bore the brunt of hundreds of store closures such as those announced at Poundworld

Data from Begbies Traynor has found that at the end of June, 472,183 businesses were experiencing “significant” financial distress, up 9% year-on-year.

Sectors with the highest number of distressed businesses were support services (112,434), construction (60,208), real estate (42,254), telecoms (31,770) and general retailers (30,574).

Companies in the south of England faced the most dramatic deterioration in their financial health, with London coming in as the worst-performing region in the UK.

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The figures come at a particularly bleak time for high street retailers.

A colossal 50,000 jobs have been axed in the first half of the year as retail workers bore the brunt of hundreds of store closures.

In the past few months, House of Fraser has put more than 6,000 jobs at risk with a radical store closure plan, while Poundworld has plunged into administration, endangering a further 5,100.

It adds to Toys R Us and Maplin, which collapsed earlier this year, while the likes of Prezzo, Byron and Jamie’s Italian have shut restaurants and culled hundreds of jobs through so-called Company Voluntary Arrangements (CVAs).

Numbers crunched by the Press Association show that approximately 50,000 staff have been made redundant or seen their role put under threat, with the bulk of them working for well-known high street chains.

However, Begbies Traynor’s research found that the rate of deterioration in companies’ financial health had slowed overall.

The 9% rise in financial distress in the second quarter compared with a year-on-year increase of 33% in the first three months of the year.

The researchers said this suggested stability might be returning to the UK economy.

Julie Palmer, partner at Begbies Traynor, said: “Looking forward, while there’s a chance this positive trend could continue, the outlook for certain industries is looking increasingly uncertain.

“The problems facing high street retail have been well documented of late, with the recent epidemic of CVAs and store closures being just the tip of the iceberg.

“However, the UK automotive sector looks to be most at risk in our view, facing job cuts and a slowdown in production output and investment, as industry pundits question how it will be able to compete with European competitors post-Brexit.”

Away from retail, BT is axing around 13,000 jobs as part of a revamped cost-cutting drive, with two-thirds of the cuts to fall in the UK.

The collapse of outsourcer Carillion has so far resulted in the loss of more than 2,375 jobs, with further pain expected.