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Sharp rise in firms facing ‘significant financial distress

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The numbers of Cambridge firms in 'significant' financial distress jumped by 22 per cent in the second quarter over the period las year with some 1,400 businesses in the city facing some level of financial distress, according to a red flat alert from Begbies Traynor.  Across Cambs some 3,819 firms reported ‘significant' financial distress, up 30 per cent on the period last year. Firms in the construction, automotive and food & beverage sector saw some of the sharpest rises.

Nationally, the numbers in significant financial distress rose 25 per cent to 329,834 firms, the sharpest rise for three years. Mary Currie-Smith, partner at Begbies Traynor's Cambridge office, said: “The rising levels of distress in the property and construction sectors indicate that these sectors are lacking strong foundations as they face headwinds from Brexit, the rising cost of imported goods and skills shortages which will drive further wage pressures.

Amongst the sectors to fare worst in Cambridge itself were those in construction (144 firms in Q2 this year as opposed to 109 for Q2 2016 - up 32 per cent), while 48 companies in the automotive sector highlighted distress - up from 37 the previous year. Food and beverages firms also demonstrated a marked increase, from 14 to 28, and industrial transportation and logistics (up from 13 to 19) showed a similar trend.

Across the South East as a whole, 60,977 firms faced 'significant' financial distress in the second quarter of the year, compared to 49,302 last year - an increase of some 24 per cent.

Nationally, the property and construction sectors saw substantial rises of 32 per cent and 22 per cent respectively, leaving 28,259 real estate businesses (Q2 2016: 21,373) and 40,495 construction companies facing ‘significant’ financial distress (Q2 2016: 33,222) and providing further evidence of a slowdown in the housing and construction markets.

Mary Currie-Smith added :“In the UK’s consumer facing industries, weak real wage growth and rising levels of personal debt continue to put a strain on the retail, bars, restaurants and leisure sectors, where many businesses have been reluctant to fully pass on the inflationary impact of the weakened pound and higher staff costs from the National Living Wage, for fear of losing customers on price in an increasingly competitive marketplace.

“As we enter the second half of 2017, it is worrying that so many businesses and particularly SMEs are facing such high levels of financial distress. These businesses are the backbone of our economy which may need to rely on a stronger than ever SME community to fuel its growth following Brexit, yet these figures indicate that many will struggle to fund increases in working capital and invest in growth.”

Last Updated ( Wednesday, 02 August 2017 09:57 )