20,000 UK Manufacturers Could Become Insolvent After Brexit.

20,000 UK Manufacturers Could Become Insolvent After Brexit.

With less than 100 days left before the UK heads to the polls to decide the future of our involvement in the European Union, it’s becoming increasingly difficult to make head nor tails of the actual facts. Both sides promise a stronger, brighter future with more jobs, more money and greater control than we currently have, but each are advocating a different vote in the referendum. Put simply, both sides cannot be right in this debate.

Into that fight has wandered countless individuals, businesses and even foreign leaders, but what of the UK’s most vulnerable manufacturing businesses, what would a so-called Brexit do to those businesses? Well, a leading insolvency firm have now warned that leaving the EU would put 20 thousand UK manufacturers at risk of closure.

The firm, Begbies Traynor, said that businesses which rely heavily on exports could be tipped over the edge if Britain leaves the EU. Their Red Flag Alert research monitors the financial health of UK companies for Q1 2016 showed that 21,061 UK manufacturers which rely heavily on exporting were in a state of ‘significant’ financial distress, over 20% higher than the same period last year, despite a weakened pound making UK exports more attractive.

Their research also shows that the UK’s financial services sector, which has significant exposure to the European financial markets and investments community is also in a substantially weaker positional financially than they were during Q1 2015. Overall, 5,319 (23%) of financial services companies were described as being in significant financial distress, which was up from 4,383 last year.

Ian Walker, 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.

“The Red Flag manufacturing figures show that the threat of uncertainty surrounding the referendum has already put the brakes on this segment of the economy, which should be accelerating with the benefit of recent Sterling weakness, with many UK firms adopting a ‘wait and see’ approach to any change to the UK’s relationship with 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.”

Whether a Brexit would actually cause these manufacturing businesses to close is a matter for discussion, but it does seem likely that some kind of hit would have to be taken in the short term. In the medium and long term, it all depends on how quickly an independent England could secure favorable trading deals with Europe and the rest of the world. If that happens quickly, then the hit to export based British manufacturers would be significantly smaller.

 

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