New research has revealed a large amount of construction companies are in "significant" financial distress compared with previous years.

The Red Flag Alert research for Q2 2017, gathered by Begbies Traynor, states the property and construction sectors both saw large rises of financial distress at 32% and 22% respectively. 28,259 real estate businesses revealed they were in distress (21,373 in 2016) while 40,945 construction companies reported "significant" distress by the end of Q2 (33,222 in 2016).

Overall, 329,834 UK companies said they were experiencing 'significant' financial distress at the end of Q2 2017, a 25% increase from Q2 2016 (263,517 companies) and the largest annual increase since Q2 2014.

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Ric Traynor, Executive Chairman of Begbies Traynor, said SMEs are "bearing the brunt" of rising distress due to uncertainty over Brexit negotiations and an inconclusive election result, as well as rising costs.

"These significant increases in financial distress also point to a slowdown in business investment at a time when the overall growth rate of the UK economy remains stubbornly sluggish," he said.

Julie Palmer, Partner at Begbies Traynor, added: "While we are seeing rising levels of distress across all corners of the UK economy, the quarterly deterioration in the property and construction sectors is particularly concerning, raising doubts over whether they have strong enough foundations to cope with upcoming headwinds, from Brexit and the rising cost of imported goods to the widening skills gap and its impact on labour cost inflation."

(LM/MH)