Is Carillion the tip of the iceberg?

Nearly half a million businesses across the UK started the 2018 year in “significant” financial distress, according to the latest Red Flag statistics from insolvency specialist, Begbies Traynor. The latest quarterly report from Begbies, covering the fourth quarter of 2017, found 493,296 were in significant financial distress, up 36% on Q4 of 2016 and a rise of 10% on the previous quarter.

Begbies said more than quarter of a million businesses across the UK – 258,349 – ended the 2017 year, “in a position of negative net worth” and 154,251 businesses had shown “a worrying increase in their working capital deficit”.

The sharp rise in financial distress was blamed on the 0.25% interest rate increase last November to 0.5%, high inflation, stagnant real wage growth, the weak pound and wider political uncertainty.

Instances of significant financial distress were visible across “every sector and region of the UK over the past 12 months”, with support services the worst performing -up 43% on 2016. Support services, construction and real estate accounted for 45% of the total in significant financial distress at the end of Q4.

It was reported that the impact of continued political and economic uncertainty surrounding the ongoing Brexit negotiations also cannot be underestimated.

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