The number of British manufacturers who are struggling financially has risen by 20%, with food and drinks companies hardest hit – despite the weak pound making UK exports cheaper abroad.
Data from the insolvency firm Begbies Traynor showed that 21,061 UK manufacturers, many of which rely heavily on exporting, ended the first quarter of this year in a state of significant financial distress – 20% more than a year ago.
The number of food and drinks makers suffering significant distress rose the fastest, by 29%, compared with a 17% increase among carmakers and a 21% rise in the broader manufacturing sector.
Britain’s financial services industry is also in a much weaker financial position than a year ago, the research found. The number of firms experiencing significant distress is up 23%, to 5,391 companies.
Begbies warned that companies could be tipped over the edge if Britain votes to leave the EU in the June referendum. It said that the uncertainty surrounding the closely fought referendum had already put the brakes on manufacturers, which should be benefiting from sterling’s weakness. It said many firms were adopting a wait and see approach to the referendum.
Julie Palmer, partner at Begbies Traynor, said: “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.
“Considering the current struggles that the UK manufacturing industries are facing, as seen most starkly in the steel industry recently, and the significant potential impact of a Brexit vote, it is crucial that firms make contingency plans for either outcome of the referendum to avoid further deterioration in their financial health.”
