The UK’s real estate sector, embracing estate agencies as well as other aspects of the property industry, has been facing “increased levels of financial distress” since the triggering of Article 50 to mark the official launch of the Brexit process.
That’s the view of Begbies Traynor, a firm offering services around corporate recovery and insolvency.
In a wide-ranging ‘Red Flag Alert’ report just issued, monitoring the financial health of companies in all sectors of the UK economy, some 477,210 businesses were experiencing ‘significant’ financial distress at the end of last month.
This is up 33 per cent compared to when Article 50 was triggered on March 29 last year - then, the figure was 358,943.
Begbies Traynor says that while ‘significant’ distress rose across every sector and region of the UK over the past 12 months, the sectors with the largest volumes of businesses in distress included Real Estate and Property, up 46 per cent on the year with 41,624 businesses in ‘significant’ financial distress.
Other sectors showing large scale rises were construction (up 26 per cent on the year), financial services (up 45 per cent) and telecommunications (up 47 per cent); telecoms appears to be the only sector to have seen a larger rise than the real estate and property industry.
“While uncertainty around the outcome of the Brexit negotiations has undoubtedly had an impact on business confidence across the UK, the economy has also faced a wide range of unexpected headwinds which have dampened progress over the past year” explains Julie Palmer, partner at Begbies Traynor.
“Currency fluctuations, rising interest rates, subdued consumer spending and a cooling property market are just some of the factors that have combined with growing political uncertainty to push nearly half a million UK businesses into financial distress over the past 12 months” she continues.
Begbies Traynor warns that while the UK economy is currently still growing, it is now starting to lag behind many other G20 members, with predicted gross domestic product growth during 2018 of around 1.7 per cent.
It says its latest Red Flag figures reflect this slowdown with increased financial distress being felt across every sector and region of the UK.
It adds that the most pressing short term issue is whether or not the Bank of England decides to raise interest rates next month.
“If they do, it could push many struggling businesses, particularly those with high levels of debt, into formal insolvency” the company warns.
In December 2016 Begbies Traynor warned that many estate agencies were suffering significant financial distress and may cease trading within the following three years.