29th Apr 2019 10:10
LONDON (Alliance News) - The health of UK companies significantly deteriorated in the first quarter of 2019, with businesses in the property sector in particularly bad shape, while the number of individuals going bankrupt in England and Wales is at a five-year high.
Data from Begbies Traynor Group PLC found that at the end of March, 484,000 business were in significant financial distress amid current economic uncertainty.
The number of businesses in "critical" financial distress, often those verging on insolvency, surged by 17% year on year.
Property was the worst-hit sector for the second quarter running, amid a fall in the number of people making big-ticket purchases including new homes.
The number of significantly distressed companies in the property sector jumped by 13% to 48,182 for the quarter, from 42,512 in the same period the previous year.
House prices fell in England for the first time since 2012 in the three months to March 2019, as Brexit uncertainty put off potential home-buyers.
Within the sector companies involved in buying, selling and letting properties took the biggest hit, with a 16% rise in the number in significant distress.
The construction sector also struggled, with the number of significantly distressed involved in building projects rising 10% to 13,018 for the period.
Financial services saw a 5% increase in the number of businesses in significant distress to 12,728, as it was particularly affected by the lack of clarity regarding the UK's exit from the EU.
The leisure and culture sectors also suffered, reporting 9% and 4% rises in the number of affected businesses respectively.
Julie Palmer, partner at Begbies Traynor, said: "Many UK businesses are currently in limbo and deferring major investment decisions.
"This, combined with consumers holding back on big-ticket purchases, has resulted in increasing significant distress across many sectors."
Ric Traynor, executive chairman of Begbies Traynor Group, said: "We have heard from businesses that Brexit uncertainty has been a hindrance to business growth and investment.
"There has already been a number of high-profile firms announcing their decision to invest in other countries, which not only impacts regional economies, but also the SME supply chain."
Meanwhile, the number of people going bankrupt across England and Wales is predicted to have jumped to its highest quarterly level since 2014 in official figures released on Tuesday.
The Insolvency Service is due to release personal insolvency figures for the first quarter of 2019.
These are made up of three types of personal insolvency – bankruptcies, debt relief orders which are aimed at people with lower levels of debt, and individual voluntary arrangements where money is shared out between creditors.
Audit firm RSM predicts that total personal insolvencies for the quarter will exceed 30,000 cases, including 4,455 bankruptcies, 19,000 IVAs and 6,945 DROs.
If the figure for bankruptcies is correct, it would be the highest quarterly total since the fourth quarter of 2014.
And if RSM's prediction that more than 30,000 personal insolvency cases were recorded in the first quarter of 2019 is also accurate, it would be the highest total for the first quarter of any year since 2011.
Alec Pillmoor, a personal insolvency partner at RSM, said: "We anticipate personal insolvencies will continue to increase and predict we will see the highest total figures for quarter one for eight years.
"Retail sales figures show sustained growth throughout the first three months of the year, and, despite the number of people in work, and increasingly full-time work, continuing to grow, the renewed confidence amongst consumers in their spending power is likely aided by borrowing and consumer credit."
Previous figures from the Insolvency Service showed the number of people going financially insolvent across England and Wales jumped to a seven-year high in 2018.
Some 115,299 people went insolvent during 2018 – marking the third year-on-year increase in a row and the highest annual total since 2011 when 119,943 cases were recorded.
source: Press Association
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