Combat news from the West economic front

10:47 28.01.2024 •

More than 47,000 UK companies are on the brink of collapse after a 25% jump in the number of businesses facing “critical” financial distress in the final three months of 2023, ‘The Guardian’ reports.

It marks the second consecutive quarter-on-quarter period when critical financial distress has risen by a 25%, the latest “Red Flag” report by insolvency specialists Begbies Traynor found.

The construction and property sectors accounted for 30% of all businesses facing critical financial distress.

The quarterly rate of increase in the number of companies facing critical financial distress grew by 32.6% in the construction industry, by 41.3% in health and education, a quarter in real estate and property services and 24% in support services.

Eighteen of the 22 sectors covered by the report recorded double-digit percentage growth in the number of firms whose finances have reached critical condition.

Julie Palmer, a partner at Begbies Traynor, said the tough macroeconomic conditions had created a “perfect storm” for UK businesses.

“After a difficult year for British businesses that was characterised by high interest rates, rampant inflation, weak consumer confidence and rising and unpredictable input costs, we are now seeing this perfect storm impact every corner of the economy,” she said.

The Bank of England raised interest rates from 0.1% at the end of 2021 to 5.25% to try to tame inflation. That has significantly increased the cost of borrowing for UK businesses, preventing many from papering over the cracks with cheap debt.

“Hundreds of thousands of businesses in the UK, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances,” Palmer added. “Sadly, for tens of thousands of British businesses who should be looking ahead with some degree of optimism, the new year will bring a fight for survival.”

The report found that 539,900 UK firms were facing “significant” financial stress by the end of last year, up by 12.9% on the third quarter of 2023.

Most firms facing critical financial distress were based in London and the south-east, with the fewest in the north-east and Northern Ireland.

“Last year, the number of firms going bust had already reached the highest level since the great financial crisis [of 2008],” said Susannah Streeter, the head of money and markets at Hargreaves Lansdown. “A big chunk of those firms sending up alarm signals are expected to collapse over the next year, adding to expectations that a recession in the UK is imminent.”

Top 10 sectors with firms facing ‘critical’ financial distress

Construction (7,849)

Support services (7,096)

Real estate & property services (6,228)

Professional services (4,347)

General retailers (3,133)

Telecoms & IT (2,830)

Health & education (2,719)

Media (1,828)

Financial services (1,373)

Food & drug retailers (1,343)

German automaker Mercedes-Benz plans to sell all of its showrooms in Germany. To this end, the concern intends to begin negotiations with possible new operators, the Bild newspaper reports.

Bild writes that Mercedes-Benz is selling all 80 German car dealerships of the concern, including its headquarters in Stuttgart. The fate of the 8,000 employees employed at these car dealerships is unclear.

The concern announced its withdrawal from Russia on March 3, 2022. Already at the end of the first half of 2022, Mercedes-Benz’s net profit decreased by 16% to 6.6 billion euros. In the second quarter of 2022, it fell another 13.6% to 3.1 billion. The total losses associated with leaving the Russian Federation amounted to about 2 billion euros. We are, of course, talking about one-time losses, because it will be difficult and scary for Germans to calculate the entire amount of lost profits for 2022-2023.

At the same time, the concern ended 2022 with a profit, thanks to sales in Asia, especially in China. Moreover, a significant part of the cars were locally produced. Then the company was concerned about weak demand in Europe.

And so Mercedes-Benz leaves Germany. Mercedes is no longer just a luxury for the Germans – it has ceased to be affordable for them.

Mercedes-Benz production from Germany is also leaving. Already in 2024, a new production of four-cylinder engines will start operating in China. In September 2022, Mercedes-Benz, together with the Chinese Foton Motor, opened the production of heavy trucks in China. The concern's factories are closing in Germany and opening in China and the USA.


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