Begbies Regulatory News (BEG)

24 October 2016

UK businesses remain resilient in the face of Brexit

Levels of financial distress fell 6% in three months following the Brexit vote

Construction and professional services sectors saw biggest reduction in financial distress

UK businesses across nearly every sector of the economy were showing positive signs of stability following the EU Referendum, new research from Begbies Traynor, the UK's leading independent insolvency firm, reveals.

According to Begbies Traynor's Red Flag Alert research for Q3 2016, which monitors the financial health of UK companies, in the three months following the EU Referendum, levels of 'Significant' financial distress among UK businesses fell as the economy showed resilience in the face of Brexit.

The research reveals that levels of 'Significant' distress fell by 6% during the past three months, from 263,517 struggling businesses in Q2 2016 down to 248,916 companies in Q3 2016. 92% of these companies, or 229,620, were SMEs in Q3 2016.

Meanwhile, year-on-year the number of UK businesses suffering 'Significant' financial distress fell 2% across the economy as a whole. This new data chimes with recent ONS data which reported that Brexit has had no major effect on the UK economy thus far.

Ric Traynor, Executive Chairman at Begbies Traynor says:

"Overall, the UK economy appears to be in a stronger position than expected following the EU Referendum result. While we wait to see whether the Government opts for a 'hard' or 'soft' Brexit strategy, businesses at least appear to be better placed to tackle any new challenges on the horizon ahead of the Government's imminent negotiations.

"However, given that the details of the future Brexit deal are as yet unknown, it is still too early to tell what longer term impact the 'Leave' decision might have on the UK economy. Clearly though, the stronger the UK economy becomes pre-Brexit, the better it will be able to withstand any post-Brexit shocks."

According to Begbies Traynor's research, the most marked improvement in financial health during Q3 2016 was within the UK construction sector, where the number of companies experiencing 'Significant' distress fell by 11% to 28,917 (Q2 2016: 32,311 companies).

The findings echo the recent construction PMI, which was 52.3 in September, up from 49.2 in August, indicating that the sector is expanding.

Julie Palmer, Partner at Begbies Traynor says:

"Our data shows that UK construction firms appear to be bouncing back after the initial Brexit shock, when in July construction activity initially shrank at its fastest pace since 2009. The good news for this sector is that these businesses can also expect a further boost following recent policy announcements including the £3 billion Home Builders Fund, plans to accelerate construction on public land and the unlocking of brownfield sites across the country.

"All eyes now turn to the upcoming Autumn Statement where further announcements are expected in support of SME developers and increased infrastructure spending. If implemented, these measures should put UK construction firms in an even better position to survive any potential fallout from the Brexit negotiations."

Begbies Traynor's research also found that professional services firms had the second most improved levels of 'Significant' financial distress during Q3 2016, falling by 10% to 11,745 companies (Q2 2016: 13,031 companies).

Julie Palmer, Partner at Begbies Traynor says:

"Professional services firms have been in high demand following the Referendum result, contributing to lower financial distress across the sector. Law firms and management consultancies are benefitting most thanks to an influx of new projects from clients looking for help in navigating the current Brexit uncertainty and the potential legislative changes that may come into force once the UK leaves the EU.

"However, challenges still remain for the sector over the long term, as any negative impact on the UK economy following a Brexit deal could dampen future transactional activity - one of the most lucrative sources of income for many large professional services firms."

- Ends -

For further information contact:

MHP Communications

Katie Hunt / Jade Neal / Giles Robinson / Hannah Winter

Tel: 0203 128 8193

Email: Begbiescorporate@mhpc.com

About Begbies Traynor Group

Begbies Traynor Group plc operates from over 40 UK locations through two operating divisions:

Begbies Traynor is the UK's leading independent business recovery practice handling the largest number of corporate appointments, principally serving the mid-market and smaller companies. We provide a range of specialist professional services primarily to businesses, their professional advisors and the major banks covering insolvency, restructuring and risk management activities.

Eddisons is a leading UK firm of chartered surveyors, offering a wide range of specialist services to banks, insolvency practitioners, and owners and occupiers of commercial property. The core services offered are valuation and disposal of property including fixed charge property receiverships; valuation and disposal of machinery and business assets; auctions; insolvency insurance brokerage; property and facilities management; and building consultancy and ratings valuations.

Information on Begbies Traynor Group can be accessed via the Group's website at www.begbies-traynorgroup.com

About Red Flag Alert

Red Flag Alert measures corporate distress signals through a comprehensive and complex methodology, drawing on factual legal and financial data from a wide range of relevant sources for companies that have been trading for over a year.

The release refers to the numbers of companies experiencing 'Significant' problems, which are those with minor CCJs (of less than £5k) filed against them or which have been identified by Red Flag's proprietary credit risk scoring system which screens companies for a sustained or marked deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth. 

Red Flag Alert is commercially available to all businesses, on an annual subscription basis, to help them better understand risk and exposure and help prepare them for the future. Further information about Red Flag Alert can be found at: www.redflagalert.com