Thousands of UK manufacturers on brink of collapse

Brexit could be the death knell for thousands of struggling UK manufacturers warned insolvency group Begbies Traynor.

It said 21,000 British manufacturers which rely heavily on exports could be tipped over the edge if the UK votes to leave the EU at the June referendum.

It said that despite UK exporters experiencing a much needed boost in recent weeks thanks to the ongoing weakness of the pound, the UK’s largest exporting industries continue to suffer from rising levels of financial distress. This it warned “doesn’t bode well for the sector in the event of a potential Brexit”.

Begbies Traynor’s Red Flag Alert research for the first quarter of this year, which monitors the financial health of UK firms, revealed that 21,061 UK manufacturers, many of which rely heavily on exporting, ended the period in a state of “significant” financial distress. That is 20% higher than the same period last year despite the weakness of Sterling making UK exports more attractive to international customers.

The number of food and beverages production firms experiencing significant problems rose the fastest at 29%, followed by a 21% increase in the broader manufacturing sector and a 17% increase in the automotive sector.

The research also showed that the UK’s financial services sector, which has large exposure to the European financial markets and investment community, is in a substantially weaker financial position compared to the same stage last year. The number of UK financial services firms suffering significant distress rose by 23% to 5,391 companies.

“Our data shows that the UK’s exporting industries are already under significant financial pressure and can ill afford any potential risk to the 50% of British exports that go into the EU. The threat of uncertainty surrounding the referendum has already put the brakes on this segment of the economy with many firms adopting a ‘wait and see’ approach to the referendum,” said Julie Palmer, partner at Begbies Traynor. “It is crucial that firms make contingency plans for either outcome of the referendum to avoid further deterioration in their financial health.”