Thousands of firms across the UK are having to look into ways to cut their costs to continue trading and growing past 12 months according to insolvency specialist, Begbies Traynor.
Announced via the latest “red flag alert” Begbies said that as the New Year got underway businesses across the UK and all sectors are beginning to feel the pressure of a higher inflation, increasing interest rates, their business growth and a drop-in consumer spending.
Executive chairman of Begbies Traynor, Ric Traynor explained that numerous firms had felt the damage of the vast fall in the value of sterling;
“Prolonged exchange rate weakness undoubtedly hit some businesses hard last year and despite a recent recovery in sterling, this improvement is yet to feed through in terms of any widespread recovery in corporate health.
“Meanwhile, the impact of continued political and economic uncertainty surrounding the ongoing Brexit negotiations cannot be underestimated.”
As mentioned in Begbies latest “red flag alert” which observes the health of businesses in the UK, it was found that during the last quarter of 2017, a grand total of 493,296 firms were undergoing significant financial distress. In fact, the amount of businesses facing distress increased by 36% compared to same time point in 2016.
The warning first rose the same week construction firm, Carillion broke down under a substantial pile of unsustainable debts. Carillion fulfilled 19,500 jobs within the UK and is now putting thousands of private sector workers at a high risk plus 30,000 small businesses, who are owed money and will potentially miss out on payments due to the steep fall.
With the New Year nearly a month in, distress about finances is a key point of focus for many support services businesses which was highlighted in Begbies report as customers pull in their spending. 121,095 firms in total within that specific sector have shown signs of distress which is 43% up compared to last year.
In terms of location, London firms are most facing significant financial distress with a mass of 121,528 businesses saying goodbye to 2017 with a bitter-sweet taste as they head towards difficult times unless they begin to cut their costs.