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Financial distress hits 60,000 industry firms in Q1

More than 60,000 construction firms faced ‘significant’ financial distress in the first quarter of 2018, Begbies Traynor has reported.

The company’s Red Flag Alert revealed that 60,541 industry firms were in ‘significant’ distress in Q1, up 26 per cent on the 48,227 that were in difficulty in the first quarter of 2017.

Begbies Traynor executive chairman Ric Traynor said uncertainty around Brexit combined with Carillion’s collapse had caused “further delays in large infrastructure and construction projects”.

The Construction Products Association has estimated that construction output fell £1.5bn quarter on quarter in Q1 in the wake of Carillion’s demise and bad weather in February and March.

There was also a 9 per cent increase in insolvencies in the first three months of the year, according to research by credit rating firm Creditsafe.

March saw £38m-turnover M&E firm Vaughan Engineering enter administration, with Carillion’s collapse being cited as a direct cause.

Financial pressure has increased in every sector of the UK economy over the past 12 months, according to Begbies Traynor, with close to half a million firms now in distress.

The business recovery specialist added that continued Brexit uncertainty reduced economic momentum as additional challenges also emerged over the past year.

Begbies Traynor regional managing partner Julie Palmer said: “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.”

The company measures financial distress by looking at firms with minor county court judgements of less than £5,000, and considering financial measures including working capital, retained profit and net worth.

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