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Highlights
-The number of financially distressed companies is rapidly increasing in the UK.
-The worst-hit sectors amid rising costs are hospitality and construction.
-The number of UK companies facing critical financial distress went up by 19% in the first quarter of 2022, as per Begbies Traynor’s recent report.
The number of financially distressed companies is rapidly increasing in the UK. As the labour and material costs are soaring and Covid loan repayments are due, pressure is mounting on the already struggling companies which are at the risk of collapse. As per the recent report by insolvency firm Begbies Traynor, the worst-hit sectors amid rising costs are hospitality and construction.
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The UK Government claims that companies were provided with all the necessary support and enhanced flexibility for the repayment of the Covid loan, but the recent report says that there should be an extension in the schedules for loan repayment. According to the new report, the number of UK companies facing critical financial distress went up by 19% in the first quarter of 2022, in comparison with the same period last year.
If the UK firms, especially the ones belonging to the construction and hospitality sectors, don’t get additional support from the Government now, then there would potentially be a flood of business failures soon. Thousands of UK firms have been struggling to cope with the rising financial burdens over the past two years, and despite the covid restrictions being withdrawn, firms are still facing the impact of covid-induced supply chain problems, rising energy bills, soaring NI payments, and other issues caused due to the escalation of the Russia-Ukraine war.
Here are 2 stocks belonging to the construction and hospitality sectors that investors can keep an eye on in the current turmoil.
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Compass Group plc (LON: CPG)
Compass Group plc is a UK-based globally operating contract foodservice business. With more than 500,000 employees, it is the biggest contract food service firm in the world. The shares of Compass Group plc were up by 0.85% as the market opened at 8:00 AM (GMT+1) on 29 April 2022, at GBX 1,715.00. The company, which is a constituent of the FTSE 100 index, has provided its shareholders with a return of 8.83% over the last one year as of 29 April 2022. The current market cap of the company stands at £30,341.64 million.
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Galliford Try Holdings plc (LON: GFRD)
Galliford Try Holdings plc is a leading UK-based construction business. The company offers high-quality buildings and infrastructure to Brits and aims to develop the built environment in the country. The shares of Galliford Try Holding plc were trading at GBX 175.00 as the market opened at 8:00 AM (GMT+1) on 29 April 2022. The company has provided its shareholders with a significant return of 43.32% over the last one year as of 29 April 2022. The current market cap of the company stands at £194.34 million.
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Tags: Begbies Traynor, hospitality, construction, financial distress, compass group, Galliford Try Holdings, FTSE 100 index
