Over 30,000 retailers in ‘significant financial distress’ at end of Q2

Over 30,000 retailers were found to be in “significant financial distress” at the end of June 2018, according to research

Professional services firm Begbies Traynor’s ‘Red Flag Alert’ research for Q2 2018 found 472,183 businesses were experiencing financial distress, a 9% increase when compared with the same period the previous year.

The sectors with the fastest growing number of businesses in distress year-on-year were support services (112,434, up 10%), construction (60,208, up 4%), real estate (42,254, up 19%), telecoms (31,770, up 9%) and general retailers (30,574, up 4%).

Regionally, businesses in the South of England continued to see the biggest deterioration in their financial health, with London being the UK’s worst performing region, where significant distress impacted 118,367 companies in the Capital alone – up 17% year on year, but down 1% compared with Q1 2018.

Begbies Traynor also found that 251,495 UK businesses ended the period in a position of negative net worth, while 109,717 demonstrated a considerable increase in their working capital deficit; both key indicators of financial distress.

Julie Palmer, partner at Begbies Traynor, said: “Although the volume of businesses in ‘significant’ financial distress remains at relative highs after four consecutive quarters of accelerating distress, the rate of deterioration in UK corporate health has slowed during Q2 2018, supported by recovering business and consumer confidence, higher levels of employment, and continued interest rate stability.

“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.”

Ric Traynor, executive chairman of Begbies Traynor, added: “There still remains a heightened level of distress among UK businesses and the slight improvement in the second quarter could yet prove to be temporary.”