Growing number of SMEs in distress » SMEInsider

Growing number of SMEs in distress

The end of 2016 was a worrying time for many small businesses, new research from Begbies Traynor has revealed. According to the report, more than 275,000 companies were showing signs of significant financial distress at the end of last year. And a majority of those are SMEs.

Nearly a quarter were based in London, where 64,764 companies ended the year in financial distress, up 5pc from 2015.

“With the World Bank revising down its growth forecasts for the UK, alongside reports that the UK’s trade deficit widened to a worse-than-expected £12.2bn in November, our data shows that levels of financial distress continue to rise across the country, most of all within the UK’s important SME community, which is widely regarded as the lifeblood of the economy,” said Julie Palmer, partner at Begbies Traynor.

 

‘Fragility of UK micro businesses’

“The scale of SME distress at the end of 2016 just goes to highlight the fragility of UK micro businesses, many of which are underfunded, lack management experience or are flawed in concept.”

“Although record numbers of new start-ups continue to join the economy each year, a large proportion don’t stay in business for long, with growing numbers of aspiring entrepreneurs returning to more established businesses as soon as the opportunity arises,” Ms Palmer added.

Ric Traynor, executive chairman of Begbies Traynor, said 2017 could be a “defining” year for UK business.

“Despite finishing the year in a state of heightened financial stress, it is too early to say that this is reflective of an underlying problem that is likely to continue or negatively impact 2017, as numerous macro indicators suggest that the New Year has got off to a reasonable start,” he said.

“EU exit negotiations and US trade policy could be major factors affecting business this year either for better or worse whilst rising inflation and fluctuating exchange rates are likely to have a negative impact. Either way 2017 could well be a defining year for UK business.”