Construction and property sector woes for West Midlands

Thousands of businesses across the West Midlands region are in ‘significant’ financial distress, with construction and property firms among those most affected.

A report from Begbies Traynor revealed that Dudley saw the biggest increase in the number of struggling businesses in the first quarter of 2019 – up eight per cent on the same period last year.

Property and construction firms now account for one in five ailing businesses in Birmingham, Stafford and Dudley, with the number of troubled property companies up by 23 per cent in Walsall.

The Red Flag Alert data for Q1 2019, which monitors the financial health of UK companies, reveals that nationally, 484,000 UK businesses are in significant financial distress, giving rise to concerns that the UK could suffer a broader economic slowdown during 2019. Companies involved in buying, selling and letting property took much of the hit with a 16% increase in struggling companies compared to the same period last year.

In the West Midlands, while Dudley was top in terms of year-on-year distress, Walsall saw the highest quarterly increase, with five percent more businesses – over 1,000 companies – facing financial difficulties between Q4 2018 and Q1 2019.

During the past 12 months, the number of Birmingham businesses in financial distress has remained relatively stable, but still accounts for a significant 7116 firms. In Wolverhampton, there was a seven per cent year-on-year decrease in the number of ailing firms but struggles on the city’s high street were evident in the 14% increase in distressed retailers.

Mark Malone, partner at Begbies Traynor in the West Midlands, says: “Many businesses in the region are in limbo and are deferring major investment decisions.  This, combined with consumers holding back on big ticket purchases, has resulted in increasing significant distress across many sectors.

“This trend is reflected in our latest Red Flag research, which shows that capital intensive sectors – such as property – are suffering as both business and consumers have taken a cautious approach and limited their exposure.

“Worryingly, the data also shows that this economic malaise appears to be indiscriminate across multiple sectors, so needs to be stopped in its tracks by a combination of political certainty and a commitment to support UK business – particularly to SMEs which are the ‘engine room’ of the UK economy.”