Businesses can expect to face major financial difficulties over the coming year, according to research by the insolvency specialists, Begbies Traynor.
The company’s Red Flag Alert, which monitors the financial health of UK companies, found that 268,898 businesses ended the final quarter of 2015 suffering significant financial distress. That was a 17% increase on the same period in 2014.
The worst performing sectors were those that are most influential in the UK’s economic growth. These included services companies, manufacturers, consumer businesses, and construction and property firms. However, all sectors of the economy saw an increase in financial distress over the past 12 months.
Ric Traynor, Executive Chairman at Begbies Traynor, said: “Struggling businesses should not expect any respite in 2016, with the UK economy facing greater headwinds this year from slow global growth, lower levels of business investment and the highest levels of consumer debt seen for five years.
“Meanwhile the looming EU referendum, potential interest rate rises, and additional cost pressures, including the introduction of the new National Living Wage in April, give cause to yet more uncertainty for UK businesses over the coming months.
“A proactive, not reactive, approach will be crucial to businesses’ financial strength in 2016, both in terms of managing their cost bases while also driving expansion in a low growth environment.”
The difficult economic climate makes it all the more important for businesses to keep a tight control on late payment from customers. Failure to monitor payments and act quickly can result in large debts building up that may prove impossible to recover if a struggling company goes out of business.
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