13% More Property Sector Businesses In Financial Distress

The prolonged uncertainty caused by multiple Brexit delays has left the real estate and property sector ending the decade with 13% more businesses in significant financial distress when compared with 2018.

According to the fourth quarter data, provided by Begbies Traynor’s Red Flag Alert, 53,159 businesses in the UK property sector are now in significant financial distress. This has risen from 47,147 businesses in 2018.

Property investors, specifically involved in the buying and selling of their own real estate, were victim to a 30% increase with 15,033 businesses now in distress, compared with 11,573 in 2018.

12,780 construction companies involved in the development of building projects were struggling financially at the end of 2018. Unfortunately, political uncertainty and the unknown outcome of the UK’s relationship with the EU has meant this figure increased by 7% to 13,687 at the end of last year.

Companies constructing residential developments have also faced a 4% rise in the total amount struggling financially with 6,330 now in significant financial distress.

Julie Palmer, Partner at Begbies Traynor, said:

 ”Businesses and the UK economy as a whole will want to avoid a repeat performance of 2019, where distress increased to record levels on the back of ongoing uncertainty around Brexit. These figures clearly demonstrate the impact of this indecision, and with political certainty and a clear Brexit path, UK businesses should, at last, be able to plan for 2020 with a greater sense of clarity.

“However, the macro economic climate is complicated, and we are seeing clear winners and losers, as evidenced by this latest Red Flag data. Currently, we do not know if the failing performance within some sectors is due to short term confidence issues, or more fundamental economic and structural issues.

Ric Traynor, Executive Chairman of Begbies Traynor Group plc, commented: 

 ”This latest data from our Red Flag Alert research suggests that UK businesses are continuing to struggle as the economy slows. If this trend of rising significant distress continues then during Q1 2020 we could, for the first time, witness financial distress creeping over the half million milestone – a first since we started our Red Flag Alert research.

“However, the recent general election now ensures we have some political certainty for the next 5 years which should hopefully put an end to business stagnation and just as importantly help improve UK productivity, which has been a casualty of the malaise we have witnessed not just since the EU referendum, but since the financial crash for 2008.

“It feels like Brexit is reaching a conclusion and the UK will finally be able to start negotiating its own business deals with key trading partners together with a workable arrangement with the EU.

“However, the world faces a new set of economic challenges compared to 2016. Economic and business protectionism continues to spread and the Euro block economy is faltering. This, combined with a move towards carbon neutrality and the structural and economic changes affecting UK businesses, means that the challenges ahead are likely to be considerable.”

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