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Mon February 17 2020

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Red flags rise for property & construction

27 Jan Research from insolvency firm Begbies Traynor suggests that the number of construction companies in ‘significant’ financial distress continues to rise.

The latest Red Flag Alert data for Q4 2019 found that the property and construction have been particularly badly hit

Of companies involved in ‘the development of building projects’ there was a 7% increase in the numbers suffering from significant financial distress (as defined by Begbies Traynor) when compared to Q4 2018 – 12,780 at the end of 2018 rising to 13,686 at the end of 2019.

This has also affected those businesses involved in ‘the construction of domestic buildings’, where significant financial distress has increased by 4% – from 6,118 in Q4 2018 to 6,360 in Q4 2019.

‘Property investors’ (businesses involved in the buying and selling of their own real estate) experienced a 30% increase in significant distress compared to the same period last year (from 11,573 to 15,033) as the property sector continues to struggle with construction output falling. Begbies Traynor said that the lead-up to the 2018 general election and continuing Brexit uncertainty had an impact.

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With retailers also struggling, across all industries, the overall number of businesses in significant distress has risen by 81% since the start of 2016 to reach 494,000 by the end of 2019.

Begbies Traynor partner Julie Palmer said: "Businesses and the UK economy as a whole will want to avoid a repeat performance of 2019, where distress increased to record levels on the back of ongoing uncertainty around Brexit. These figures clearly demonstrate the impact of this indecision, and with political certainty and a clear Brexit path, UK businesses should, at last, be able to plan for 2020 with a greater sense of clarity.

“However the macro economic climate is complicated and we are seeing clear winners and losers, as evidenced by this latest Red Flag data. Currently, we do not know if the failing performance within some sectors is due to short term confidence issues, or more fundamental economic and structural issues.”

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