7 February 2014

Financial Health across the wider Economy

According to the latest Begbies Traynor Red Flag Alert research for Q3 2013, which monitors the financial health of "Corporate UK", levels of ‘Critical’ financial distress among UK businesses continue to fall albeit at a slower rate, decreasing 2% on top of last quarter’s 9% reduction; with improving consumer confidence making up for subdued summer trading within the UK’s core services sectors.

Across all sectors, UK businesses experiencing ‘Critical’ financial problems reduced 2% from 3,001 in Q2 2013 to 2,951 in Q3 2013, supported by significant improvements in the UK’s consumer-facing industries including Bars & Restaurants, Hotels, Food Retailing and General Retail, which all experienced marked reductions in businesses suffering ‘Critical’ distress, falling 30%, 21%, 16% and 8% respectively.

However this positive trend masks a declining trend within the UK’s vital service industries, with Professional Services, Financial Services and Support Services all experiencing significant increases in ‘Critical’ distress levels during the last three months, rising 34%, 28% and 9% respectively. These increases bring the total number of services businesses suffering ‘Critical’ distress up to 330, of which 83% are SMEs, suggesting that the recent improvement as reported in the latest Markit/CIPS PMI data is being fuelled by the larger companies within these services sectors. According to Begbies Traynor’s analysis, declining net worth and increasing working capital deficits are driving the reported increases in distress among this group.