Businesses across the UK are weathering post-Brexit uncertainty better than expected but one region looks less robust — London.
Research by Begbies Traynor, an insolvency firm, indicates that London lagged behind a national average improvement in financial health in the three months after the June 23 vote to leave the EU.
In most regions, fewer businesses were found to be in “critical” condition, the most serious category of financial distress in Begbies Traynor’s index, after the referendum.
But in London the number of companies pitched into “critical” distress rose from 467 to 498, up 6.6 per cent on the previous quarter.
While the number of companies in “significant” financial distress fell by 6 per cent nationwide, the figure for the capital dropped by just 4 per cent.
Begbies Traynor puts London’s lacklustre performance down to the slow post-Brexit recovery for UK financial services, many of which are in the capital.
The improvement in the business health of financial services companies was just 2 per cent compared with an average of 6 per cent across sectors.
Julie Palmer, a partner at Begbies Traynor, said: “Our fear is that this sluggish performance, of both London and the financial services sector, could be an early warning of a stalling London economy.
“Given the City of London’s dependence on the financial services sector, which has a great deal to lose from Brexit … there is clearly a great deal riding on the ultimate terms of the UK’s withdrawal from the EU.”
Financial services have been among the sectors worst hit by the uncertainty caused by the Brexit vote, according to Carolyn Fairbairn, director-general of the CBI employers’ organisation.
Concern for the status of overseas banks based in London in the event of a UK exit from the EU single market are said to be impeding investment decisions in the City.
Of 3.2m UK-registered businesses analysed by Begbies Traynor, 250,818 were assessed to be in critical or significant distress in the third quarter. This means nearly 8 per cent of UK businesses are still in some trouble.