Uncertainty stalls business growth – Red Flag Alert

BUSINESSES across the UK have battened down the hatches since the start of the year, holding back investment for growth and initiating recruitment and pay freezes as they await the outcome of May’s General Election.

This has resulted in a state of stagnation across all areas of the economy, warns business recovery specialists Begbies Traynor.

According to its Red Flag Alert research for Q1 2015, which monitors the financial health of UK companies, levels of ‘Significant’ financial distress fell nationally just 1% over the past three months to 227,993 businesses (Q4 2014: 240,685), while levels of more severe ‘Critical’ distress increased slightly by 4% to 2,461 failing companies (Q4 2014: 2,362); the first increase in this category since Q2 2014.

Critical financial distress levels amongst Birmingham businesses were above the national average, increasing by 17% between Q4 2014 and Q1 2015 (46 to 54), although year-on-year businesses with serious problems were down by 19% (67 to 54).

The number of businesses with Significant financial distress fell by 9% quarter-on-quarter (3,802 to 3,443) and 7% year-on-year (3,695 to 3,443).

Across the Midlands region, businesses experiencing Critical financial distress rose by 21% (282 to 341) between Q4 2014 and Q1 2015, whilst year-on-year there has been a 21% fall in firms with serious problems (430 to 341).

Midlands businesses with Significant financial problems remained broadly flat quarter-on-quarter (28,772 to 28,497) but rose by 4% (27,432 to 28,497) year-on-year.

Sectors in the Midlands region that experienced first quarter rises in Critical financial distress included general retailing from 11 to 19, construction from 40 to 61, and manufacturing from 28 to 42.

Those sectors that fared better in the Midlands were financial services from 6 to 1, and bars & restaurants from 22 to 10.

John Kelly, regional managing partner at Begbies Traynor’s Birmingham office, said: “Whilst concerns over the outcome of the election are prevalent across the country, distress levels across the Midlands have shown their own distinct increase. It seems clear that many businesses have taken the decision to cut back or hold fire until there is more certainty, and in terms of timing, that means after the election.

“With economic forecasters predicting that elevated political uncertainty would result in subdued consumer confidence, increases in the value of the pound and rising volatility in the commodity markets, this has all added up to much-needed new investment not taking place, with new hires and pay increases shelved to provide a buffer in the event that trading levels subsided.”