Brexit effect begins to bite UK businesses

The UK economy ended 2018 in a weak holding pattern, according to research by the British Chambers of Commerce (BCC), with stagnating levels of growth and business confidence, largely resulting from challenging trading conditions and political indecision over Brexit. 

Among its findings are rising labour shortages among 81% of UK manufacturers and falling confidence in the manufacturing and services sector that turnover and profitability will increase in the next 12 months.

Adam Marshall, director general of the BCC, said: “With little clarity on the trading conditions they will face in just two months’ time, companies are understandably holding back on spending and making big decisions about their futures.” 

But this is having an impact on the supply chain, with both new company insolvencies and total insolvencies rising to their highest level since 2014. 

According to Brian Johnson, business recovery and insolvency partner at HW Fisher, the figures reflect the fact that the impact of Brexit is “beginning to bite”. “Large companies are withholding investment decisions, which is already having a significant detrimental impact on smaller companies further down the supply chain,” he said in a statement. 

“There is plenty of evidence of this happening in the retail and construction sectors,” he continued. “Moreover, a lot of larger retailers and construction firms are stretching payment terms to the limit, heaping even more pressure on their suppliers.”

A year after the collapse of construction giant Carillion, there are warnings from the Federation of Small Businesses (FSB) that lessons have yet to be learned. 

Referring to troubled outsourcing contractor Interserve, FSB chairman Mike Cherry has called for reassurances that payment terms would not be lengthened or invoices disputed in order to delay payments. “Interserve must not become another Carillion,” he said.