Distress steadies after Brexit vote

Gillian Sayburn, director at Begbies Traynor in Newcastle.
Gillian Sayburn, director at Begbies Traynor in Newcastle.

The number of businesses in the North East experiencing early signs of business distress has stabilised in the three months following the Brexit vote, according to rescue and recovery specialist Begbies Traynor director Gillian Sayburn.

There were 5,409 businesses in the region showing ‘significant’ distress, a fall of four per cent in the third quarter compared with the previous quarter. However, the decrease was more marked across the UK with a national average fall of six per cent.

Levels of significant distress still showed a rise when compared with the same period the previous year, increasing by two per cent across the UK and by four per cent in the North East.

Looking at ‘critical’ distress, the more advanced signs of financial problems, the North East has seen a two per cent increase quarter on quarter, compared with a two per cent fall across the UK as a whole.

In terms of the health of businesses in various sectors, most sectors showed a fall in significant distress since the previous quarter although transport (seven per cent), utilities (three per cent), printing (two per cent) and media (one per cent) all rose.

However, the year-on-year picture was less encouraging with almost three quarters of sectors seeing increases in significant distress. Among those worse hit were utilities (25 per cent); financial services (15 per cent); sport and health (13 per cent); and manufacturing (eight per cent).

Ms Sayburn, director at Begbies Traynor’s Newcastle office, said: “It’s positive news that despite the initial panic immediately following the EU referendum, fears seems to have lessened somewhat and, in fact, the business distress in the North East has seen a slight fall quarter on quarter, although this may be due to seasonal factors as it is still markedly higher than the same period the previous year.

“While many people seem to be convincing themselves that it’s business as usual, we fear that this may prove to be only a temporary reprieve with continuing turmoil for sterling indicating the markets’ falling confidence in prospects for the UK economy.

“Unfortunately, whatever happens, Britain is facing a period of prolonged uncertainty in the run-up to the expected triggering of Article 50 in 2017 and the protracted and complex Brexit negotiations which will follow. With most businesses needing a secure environment in order to flourish, SMEs need to proceed with caution and prepare themselves for a bumpy ride as the UK navigates its way through unknown waters.”