Business week: Lincolnshire weathers the Brexit storm

It’s been raining Brexit bleakness since June 2016, but despite business distress in the UK and the East of England, Lincolnshire is managing to keep its head above water. We’re told uncertainty over Britain’s departure from the EU is linked to increasing financial difficulties across the country.

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Warnings came alongside new figures from management specialists Red Flag Alert and The Insolvency Service. Almost one in five UK businesses were classified as having critical problems (County Court judgements totalling £5,000 or more.)

But Lincolnshire is showing resilience. The data released by Begbies Traynor revealed that the number of companies in Lincolnshire displaying ‘significant’ distress in Q1 of 2019 since the final quarter of 2018 rose by just 1% – a total of 5,440 businesses.

Year on year, UK ‘distress’ has risen by 2% — measured by marked deterioration in financial ratios. Lincolnshire saw a 1% decrease.

Some sectors are faring better than others in the county. Property services showed a 19% increase in significant distress compared with last year – affecting 535 businesses. Printing and packaging companies saw distress rise by 37% and financial services saw a 15% hardship climb.

Meanwhile, the automotive sector marked an 11% distress decrease in Lincolnshire year on year, and bars and restaurants showed a 7% improvement.

Gareth Rusling, who heads Begbies Traynor’s Lincoln office, said: “Uncertainty continues to cast a long shadow over the economy with any potential agreement on a Brexit deal now kicked further down the road.

“In Lincolnshire, as across the economy as a whole, firms are quite sensibly battening down the hatches and putting on hold capital investment such as in new plant machinery or technology.

“While it is encouraging to see the apparent resilience of firms in the county, all businesses, and particularly SMEs, would do well to keep a tight rein on cash flow in this prolonged and unpredictable situation.”

However, the outlook is not that rosy. Rick Smith, Managing Director at Forbes Burton, a Lincolnshire rescue and insolvency specialist, said: “This is a real concern and should be taken seriously. For example, in the Yorkshire and Humber area, companies with Critical Problems (companies with County Court Judgements totalling £5,000 or more) rose from 130 Q1 2018 to 172 Q1 2019 and in the East of England, which includes Lincolnshire, the figures were up from 155 to 168 over the same period.

“The impact of the uncertainty around Brexit is really starting to take hold now and we may see even more increases in the number of businesses facing problems in the future.”

The construction industry, usually used as a ‘bellweather’ for the UK economy showed a 9% increase in businesses in financial difficulty. The East of England specifically showed a 6% increase from the from Q4 2018 to Q1 2019.

Rick added: “The hotels and leisure industry have also been hit hard by Brexit uncertainty. The reduced labour supply as the number of foreign workers falls and the cost of a 5% increase in the national living wage has pushed 9% more hotel businesses into financial distress as last year.”

Rick explained that the lack of business travel could have had the biggest impact on hotel profits, as businesses cut back on travel in light of the uncertainty over whether or not the UK can scramble together a Brexit deal.

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