As Britain officially leaves the EU, ongoing uncertainty due to Brexit and the UK’s future trade relationship with Europe represents a significant risk to almost half a million UK businesses, experts claim.
A report from insolvency firm Begbies Traynor based on financial data warns that 494,000 UK businesses are in ‘significant financial distress’.
Property, support services, construction and retail businesses were the worst off and a large number of those in trouble were less than five years old, according to the firm.
Julie Palmer, a partner at Begbies Traynor, 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.”
The warning comes after trade credit insurer Atradius warned that the relatively short window in which the UK and EU would have to negotiate a trade deal could lead to a ‘painful adjustment’ for companies.
“The current trading arrangements remain in place until December 31, 2020,” Atradius said in a statement.
“This short timeline makes it more likely that only a limited future deal is plausible, which could potentially spell a painful adjustment in 2021.
“Further, should the two parties fail to negotiate a trading agreement by the end of the transition period, they risk falling back on WTO (World Trade Organisation) rules. The pressures on the economic environment and the underlying uncertainties continue to take a toll across the UK and all EU markets.”
Atradius also highlighted that growth was forecast to slow in the UK and that the number of insolvencies had increased significantly since 2018. Insolvencies were up 8% last year and are expected to continue to rise by at least 7% in 2020.
Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency, said: “Brexit uncertainty, rising insolvencies and low levels of business confidence are all linked.
“Many businesses have proved incredibly resilient over the last few years, but unless they get more detail about a post-Brexit trade deal soon, 2020 could prove even harder.”
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