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New research by insolvency body R3 has found that most of the insolvency industry has concerns about the potential impact of Brexit. Its survey of 364 members found that three quarters predict corporate failures will rise by the end of 2017 as a result of the referendum.
45% of those who responded to the survey said that Brexit has been mentioned by businesses who were seeking help since June’s referendum result. Respondents feel that a so-called ‘hard Brexit’ would increase insolvency numbers significantly more than a ‘soft Brexit’ would and with the country looking like it is heading for a ‘hard Brexit’, it remains to be seen if their predictions will come true.
There has already been some high profile examples who have blamed Brexit for their business troubles in the last six months of 2016 including Lowcostholidays, who was placed into administration in July partially blaming Brexit uncertainty and Jamie Oliver who announced the closure of six restaurants with Brexit again being partly to blame for their closure.
President of R3, Andrew Tate, commented on the findings, saying; “The insolvency and restructuring profession is concerned about the impact leaving the EU will have on the financial health of UK businesses. Even before leaving, the effects of ‘Brexit’ are being felt: a suddenly weaker pound and increased business uncertainty are already causing problems.
“Insolvency practitioners are on the frontline when it comes to supporting struggling businesses, and a significant minority say they have seen an increase in businesses needing help since June. ‘Brexit’ is frequently coming up as an issue when businesses seek advice.”
It seems that businesses are going to have to be more pragmatic and proactive in their approach over the next few months to deal with this uncertainty and weather the storm. This has already been seen recently as around half of the UK’s small businesses are looking into price rises as a result of trying to deal with the months ahead.
As manufacturing, retail and financial services are predicted to be the sectors that face the brunt of Brexit, it seems that are they now preparing themselves for what is to come. With the fall in the value of sterling, the rise in inflation and the drop in consumer spending, it looks likely that those who import from the EU and those who rely on the public’s spending power to make money may struggle.
Mr Tate concluded his findings by talking about the difficulties businesses will face in planning amidst Brexit; “The uncertainty around what final form ‘Brexit’ will take makes it difficult for businesses to plan ahead and assess what risks and opportunities they have… If businesses do run into trouble, they should seek advice as early as possible. Ignoring problems will not make them go away.”