Businesses face six months of turmoil before ‘new normal’

BUSINESSES can expect six months of turmoil in the UK markets before the economy finds a “new normal” – with construction and property hardest hit, according to research.

Insolvency firm Begbies Traynor found that while UK businesses across every sector showed positive signs of stability in the run-up to the EU referendum, they had been rocked by “severe market turmoil” since the vote.

According to the firm’s Red Flag Alert research, which monitors the financial health of UK companies each quarter, from April to June, levels of “significant” financial distress among UK businesses fell for the first time since the period immediately after last year’s general election.

There were 263,517 businesses which struggled in the second quarter, down from 274,595 in the first three months of the year, a drop of 4pc.

Levels of financial distress decreased across every sector and every region, with the most marked improvement among London-based businesses. But Begbies Traynor warned that, over the next six months at least, any positive improvements enjoyed since April were likely to be reversed.

Julie Palmer, a partner at the firm, said: “UK construction and real estate has certainly been hit hardest following the Brexit result, with many highprofile investors pulling out of UK property over the past three weeks.

“With experts predicting that London property prices could plummet by as much as 20pc and nearly 50,000 firms in this sector already suffering from ‘significant’ financial distress, the foundations for this sector are looking decidedly shaky.”

Executive chairman Ric Traynor added: “The Bank of England’s commitment to maintaining interest rates at a record low, as well as the Government’s inference that they might cut corporation tax to less than 15pc, could help to stabilise the economy and consumer sentiment over time.

“However, we expect the business environment to worsen over the next six months, at least, before we settle into the ‘new normal’.”