NEW figures show number of businesses in Southampton which experienced “ significant financial distress” in the second quarter of this year has risen by more than a fifth on the same period in 2016.

The figures released by independent business recovery specialists Begbies Traynor show that 1,650 businesses in the city have faced some level of financial distress in Q2 compared to 1,386 in the same period 12 months ago.

This is however slightly below the national average.

Nationally, 329,834 firms reported “significant’ financial distress in Q2 – a rise of 25 per cent on the same period last year and the highest quarter-on-quarter increase for three years.

Amongst the sectors to fare worst in Southampton were those in construction, which saw a 27 per cent rise in distress levels, and financial services (up 21 per cent from 29 to 35).

Nationally, the property and construction sectors saw substantial rises of 32 per cent and 22 per cent respectively, leaving 28,259 real estate businesses (Q2 2016: 21,373) and 40,495 construction companies facing ‘Significant’ financial distress (Q2 2016: 33,222) and providing further evidence of a slowdown in the housing and construction markets.

Meanwhile, the research shows that the UK sectors most reliant on consumer spending have been hit particularly hard during the second quarter, with volumes of financial distress increasing year-on-year by 22 per cent among leisure businesses 17 per cent for general retailers, 17 per cent for automotive companies and 16 per cent among bars and restaurants.

Gavin Savage, partner at Begbies Traynor’s Southampton office, said: “The rising levels of distress in the property and construction sectors indicate that these sectors are lacking strong foundations as they face headwinds from Brexit, the rising cost of imported goods and skills shortages which will drive further wage pressures.

“In consumer facing industries, weak real wage growth and rising levels of personal debt continue to put a strain on the retail, bars, restaurants and leisure sectors, where many businesses have been reluctant to fully pass on the inflationary impact of the weakened pound and higher staff costs from the National Living Wage, for fear of losing customers.

“As we enter the second half of 2017, it is worrying that so many businesses, particularly SMEs, are facing such high levels of financial distress. These businesses are the backbone of our economy which may need to rely on a stronger than ever SME community to fuel its growth following Brexit, yet these figures indicate many will struggle to fund increases in working capital and invest in growth.”