Big rise in Merseyside companies in distress since EU referendum

Data from insolvency experts Begbies Traynor reveals 6,872 businesses in the region were experiencing significant financial distress at the end of Q3 2019. Tony McDonough reports

Brexit
There has been a surge in companies in distress in Merseyside since the 2016 referendum

 

There has been a surge in the number of firms in ‘significant’ financial distress since the EU referendum in June 2016, new figures reveal.

Data from the Liverpool office of insolvency experts Begbies Traynor reveals 6,872 businesses in the region were experiencing significant financial distress at the end of Q3 2019, a 35% increase from the end of Q3 2016 where the figure was just 5,066.

In additions to that, Begbies latest Red Flag research shows a 10% rise in the number of businesses in ‘critical’ financial distress in the last 12 months.

A business in significant distress is one with minor County Court Judgements (less than 5,000) filed against them. One in critical distress will have minor CCJs of more than £5,000 and is often a precursor to formal insolvency.

The largest volumes of businesses now in distress on Merseyside are found in the construction (976 companies), real estate and property (818), and support services (1,119) sectors.

Since the EU referendum in June 2016, the construction sector has seen a 26% increase in distress. The real estate and property sector has seen a 58% increase and the support services sector a 48% increase.

Begbies
Keith Tully, partner at Begbies Traynor in Liverpool. Picture by Dominic Salter

 

Although the study does not establish cause and effect between the verdict of the referendum, which was for the UK to leave the EU, and the rise in companies in distress, Keith Tully, partner at Begbies Traynor in Liverpool, said it was clear the uncertainty over Brexit had led some Merseyside forms to hold back on investment.

He explained: “Three years on from the referendum it is clear that many businesses have struggled with the lack of certainty created by Brexit. As we enter the final furlong in this latest round of negotiations boardrooms across the region remain uncertain.

“The reaction to whatever situation emerges from October 31 will be an indicator of how businesses will perform in 2020.

“Much investment across Merseyside has been on hold as businesses have had their hands tied by not knowing what the state of play will be post-Brexit and whether the agreements or contracts they currently have in place will still be valid following the expected withdrawal.

“The substantial increase in critical distress is worrying and means that jobs and livelihoods are on the line if directors don’t take swift action.”

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