A RISING number of businesses in Southampton are in “significant” financial distress, research has found.

Property and manufacturing were the sectors showing the highest rates of stress in the area, according to business recovery specialist Begbies Traynor.

Nationally, the number of struggling businesses has risen by 139,000 since the EU referendum in 2016, the company reported.

It blamed continuing economic and political uncertainty for the situation.

The number of businesses struggling in Southampton grew one per cent between the second and third quarters of 2019 to 2,471. That was a three per cent rise year-on-year.

However, some sectors in the city showed “tentative signs of stability”, with the bars and restaurants sector showing an eight per cent drop in the number of businesses in distress. In automotive, the decrease was four per cent.

Steve Powell, partner at Begbies Traynor in Southampton, said: “Three years on from the referendum, the latest Red Flag research highlights just how businesses are struggling as a result of uncertainty. Much investment is on hold as businesses wait to see what the state of play will be post-Brexit and whether the agreements or contracts they currently have in place will still be valid following the expected withdrawal.

“This is stifling growth both in Southampton and nationwide.

“What’s clear is that until businesses and consumers alike are given clarity on the economic situation post-Brexit, stagnation will remain the norm and productivity will continue to suffer.”

Begbies’ Red Flag Alert data, which monitors the financial health of UK companies, reveals that nationally, 489,000 UK businesses are in significant financial distress, with the real estate, construction, retail and travel sectors the most severely affected. That was a rise of 22,000 businesses since the same period last year.

The number in financial difficulty nationally has risen 40 per cent since the EU referendum more than three years ago.

The Red Flag Alert has been measuring corporate financial distress since 2004.

It draws on legal and financial data from a range of sources, including intelligence from Begbies Traynor’s insolvency business.

Its definition of businesses in “significant” distress includes those with county court judgements of less than £5,000 filed against them, as well as those which have been identified by Red Flag’s credit risk scoring system.

Other research has suggested recently that Southampton is in a stronger position ahead of the uncertainties of Brexit.

Southampton’s economy performed more strongly than any other city on the south coast in the second quarter of this year, according to the UK Powerhouse report, published by Irwin Mitchell and the Centre for Economic and Business Research. It found the city’s economy had grown 1.6 per cent year-on-year, putting it eighth in a national league table.