Inflation adds to pressure as Birmingham Businesses face increased distress levels

18/04/2017 by

With growing uncertainty surrounding the UK's future trade links with Europe - combined with rising inflation - businesses across Birmingham saw an increase in financial distress across the majority of sectors in the first three months of 2017, new figures have shown.

In the Midlands as a whole, 36,540 firms were in 'Significant' financial distress during that period - up six per cent on the previous quarter (34,348 firms), data released by the UK’s leading independent business recovery specialists Begbies Traynor reveals.

Begbies Traynor’s Red Flag Alert research for Q1 2017, which monitors the financial health of UK companies, shows that in Birmingham itself 4,612 businesses reported 'Significant' financial distress in the first quarter of 2017, compared to 4,319 in the last three months of 2016 - an increase of seven per cent.

Looking at the national picture, 296,054 businesses were experiencing ‘Significant’ financial distress in the first three months of 2017, an increase of seven per cent on the previous quarter (276,518 businesses), and an increase of eight percent on the same period last year (the first three months of 2016, when 274,595 businesses were in distress).

Mark Malone, Director at Begbies Traynor's Birmingham office, said: "Given the scale of the increases in distress during Q1, it would appear that food suppliers, logistics companies and wholesalers are yet to fully pass on rising costs to their customers. It should only be a matter of time before we see this happening especially when considered alongside other factors such as the National Living Wage. Once those costs are passed onto consumers, we’d expect further pressure on sectors exposed to discretionary spendings such as retail, bars and restaurants, travel and leisure.”

Amongst the worst hit sectors in Birmingham in terms of 'Significant' financial distress were industrial transportation and logistics (climbing 27 percent from 92 to 117, financial services (up 16 percent from 51 to 59), and food and drug retailers (up ten percent from 225 to 247). Construction firms hitting problems also showed a small increase, going up from 308 to 316. Bars and restaurants bucked the trend, falling three per cent from 184 to 179 in the first three months of the year.

Ric Traynor, Executive Chairman of Begbies Traynor, added: “These figures show that rising energy and food prices, combined with the devaluation of Sterling, have undoubtedly put a strain on the much of the UK’s supply chain. As we wait to see what a future UK trade agreement with Europe might look like, these suppliers face continued uncertainty, not just in terms of their European distribution channels but also with regards to staffing, given their higher reliance on European migrant workers.

“It is clear that UK suppliers, wholesalers and manufacturers can’t afford to adopt a ‘wait and see’ approach – they’ll need to rapidly invest in improving their efficiency or renegotiating prices with customers to avoid the risk of falling into more severe financial distress in the coming months.”