TIDMBEG
Begbies Traynor Group PLC
18 July 2016
Research shows British businesses are in a strong position to
face Brexit challenges,
but expect at least six months of turmoil ahead
Levels of financial distress fell 4% ahead of the Brexit vote,
but more than 240,000 SMEs still in a dire state
UK Property and Construction sectors expected to bear the brunt
of Brexit, with nearly 50,000 firms at risk
UK businesses across every sector of the economy were showing
positive signs of stability in the run up to the EU Referendum, new
research from Begbies Traynor, the UK's leading independent
insolvency firm, reveals. However after the severe market turmoil
that immediately followed the Brexit decision, experts warn that it
could be at least another six months before we see a 'new normal'
in the UK economy.
According to Begbies Traynor's Red Flag Alert research for Q2
2016, which monitors the financial health of UK companies, in the
three months preceding the EU Referendum, levels of 'Significant'
financial distress among UK businesses fell for the first time
since Q3 2015, as the UK economy showed tentative signs of
stability ahead of the Brexit vote.
The research reveals that levels of 'Significant' distress fell
by 4% during Q2 2016, from 274,595 struggling businesses in Q1 2016
down to 263,517 companies in the past three months, of which 93%
(244,402) were small to medium sized businesses (SMEs). The sector
most exposed to economic volatility remains to be UK construction
and real estate, in which 49,186 firms were classified as
experiencing 'Significant' financial distress in the period.
Overall, levels of financial distress decreased across every
sector and every region of the UK economy, but the most marked
improvement in financial health during Q2 was among London-based
businesses, where the number of companies experiencing
'Significant' distress fell by 5% to 43,737 (Q1 2016: 46,234
companies).
The findings echo former Chancellor George Osborne's comments in
the wake of the Brexit result that the UK economy is "about as
strong as it could be to confront the challenge our country now
faces". However Begbies Traynor warns that over the next six months
at least, any positive improvements seen since April are likely to
be reversed following the immediate negative impact that the Brexit
result had on British businesses.
Julie Palmer, Partner at Begbies Traynor, says:
"Our data shows that levels of 'Significant' corporate distress
decreased across all regions and all sectors of the economy in the
lead up to the Referendum vote; the first time we've seen such an
improvement since the period immediately following last year's
General Election. This suggests that UK businesses were in a
relatively stable and improving financial position ahead of the
Brexit vote, however we expect this trend to reverse as a result of
the uncertainty created since then.
"UK construction and real estate has certainly been hit hardest
following the Brexit result, with many high profile investors
pulling out of UK property over the past three weeks. With experts
predicting that London property prices could plummet by as much as
20 percent and nearly 50,000 firms in this sector already suffering
from 'Significant' financial distress, the foundations for this
sector are looking decidedly shaky."
Ric Traynor, Executive Chairman at Begbies Traynor says:
"Although more than half the country voted for a Brexit, the
result has undoubtedly caused a spike in uncertainty while raising
concerns over job security, contributing to weaker consumer
confidence and the deferral of investment plans, all of which is
likely to impact spending and business growth in the short
term.
"The Bank of England's commitment to maintaining interest rates
at a record low, as well as the Government's inference that they
might cut corporation tax to less than 15 percent, could help to
stabilise the economy and consumer sentiment over time. However we
expect the business environment to worsen over the next six months,
at least, before we settle into the 'new normal'.
"Assuming Prime Minister Theresa May and her new Cabinet do
invoke Article 50 as planned, the process of exiting the EU, while
at the same time agreeing new trade agreements, is likely to be a
long and drawn out affair, so businesses should prepare themselves
for the long haul."
- Ends -
For further information contact:
MHP Communications
Katie Hunt / Jade Neal / Giles Robinson / Hannah Winter
Tel: 0203 128 8193
Email: Begbiescorporate@mhpc.com
About Begbies Traynor Group
Begbies Traynor Group plc operates from over 40 UK locations
through two operating divisions:
Begbies Traynor is the UK's leading independent business
recovery practice handling the largest number of corporate
appointments, principally serving the mid-market and smaller
companies. We provide a range of specialist professional services
primarily to businesses, their professional advisors and the major
banks covering insolvency, restructuring and risk management
activities.
Eddisons is a leading UK firm of chartered surveyors, offering a
wide range of specialist services to banks, insolvency
practitioners, and owners and occupiers of commercial property. The
core services offered are valuation and disposal of property
including fixed charge property receiverships; valuation and
disposal of machinery and business assets; auctions; insolvency
insurance brokerage; property and facilities management; and
building consultancy and ratings valuations.
Information on Begbies Traynor Group can be accessed via the
Group's website at www.begbies-traynorgroup.com
About Red Flag Alert
Red Flag Alert measures corporate distress signals through a
comprehensive and complex methodology, drawing on factual legal and
financial data from a wide range of relevant sources for companies
that have been trading for over a year.
The release refers to the numbers of companies experiencing
'Critical' problems which are those with CCJs totalling over
GBP5,000 within a three month period or winding-up petitions
against them or which have entered Corporate Voluntary
Arrangements.
The release also refers to the numbers of companies experiencing
'Significant' problems, which are those with minor CCJs (of less
than GBP5k) filed against them or which have been identified by Red
Flag's proprietary credit risk scoring system which screens
companies for a sustained or marked deterioration in key financial
ratios and indicators including those measuring working capital,
contingent liabilities, retained profits and net worth.
Red Flag Alert is commercially available to all businesses, on
an annual subscription basis, to help them better understand risk
and exposure and help prepare them for the future. Further
information about Red Flag Alert can be found at:
www.redflagalert.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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