Big Increase in Financial Distress amongst Birmingham Companies

31/07/2017 by

Birmingham saw a 25 per cent increase in the numbers of firms in 'Significant' financial distress in the second quarter of the year, compared to the same period last year, new figures have shown. 

4,924 businesses in the city have faced some level of financial distress in Q2 2017 compared to 3,952 in the same period 12 months ago, data released by the UK’s leading independent business recovery specialists Begbies Traynor reveals. 

Nationally, 329,834 firms reported 'Significant' financial distress in Q2 - a rise of 25 per cent on the same period last year and the highest quarter-on-quarter increase for three years. 

Amongst the sectors to fare worst in Birmingham were the construction industry, where 393 companies said they'd faced problems (up 28 per cent), financial services, where 79 firms reported 'Significant' distress, and automotive (up 26 per cent from 144 in Q2 2016 to 181 in Q2 this year).  Industrial transportation and logistics companies also showed an increase (106 in Q2 2017 against 57 for the same period last year) - climbing 86 per cent. 

In the Midlands as a whole, 40,235 firms faced 'Significant' financial distress in the second quarter of the year, compared to 32,954 last year - an increase of some 22 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. 

Meanwhile, the research shows that the UK sectors most reliant on consumer spending have been hit particularly hard during the second quarter, with volumes of financial distress increasing year-on-year by 22% among leisure businesses (Q2 2017: 8,206 vs. Q2 2016: 6,700), 17% for general retailers (Q2 2017: 25,598 vs. Q2 2016: 21,939), 17% for automotive companies (Q2 2017: 10,741 vs. Q2 2016: 9,161) and 16% among bars & restaurants (Q2 2017: 13,635 vs. Q2 2016: 11,793). 

Gareth Prince, director at Begbies Traynor's Birmingham 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. 

“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.”