Almost 50,000 NW firms in ‘significant financial distress’

Gary Lee

New research from Manchester-based insolvency experts Begbies Traynor reveals there are now almost 50,000 North West businesses in significant financial distress.

The Red Flag Alert data for the second quarter of 2019, which monitors the financial health of North West companies, found 46,919 businesses were experiencing significant distress at the end of June 2019 – a two per cent increase on the same time last year.

The average debt of companies has also doubled to £66,226 a year, from £29,872 in 2016.

There was also a worrying increase in the number of businesses in critical distress during the same period – often a precursor to formal insolvency – with a rise of six per cent year-on-year.

Support services has the largest volume of businesses in significant distress (8,659) in the region, a year-on-year increase of three per cent.

Construction followed (6,084), alongside real estate & property (4,760) which is an increase of 15% year-on-year.

This means that more than 10,000 firms in the North West property and construction sector are now in distress.

Gary Lee, partner in the Manchester office of Begbies Traynor, said: “These statistics reveal the scale of the challenge for SME’s in our region.

“The volume of firms in distress in key sectors in the North West, like property and construction is alarming.

“Political uncertainty is one of the reasons why many companies have said they are suffering.

“Now we already have complete clarity on Boris Johnson becoming our new Prime Minister, we are all now looking for certainty on the Brexit position.

“We have to remember that while an average debt of £66,000 doesn’t seem much to large companies in our region, this can be of significant detriment to the SMEs in the region.”

The research refers to the numbers of companies experiencing ‘significant’ problems, which are those with minor county court judgments, of less than £5,000, filed against them or which have been identified by Red Flag’s proprietary credit risk scoring system which screens companies for a sustained or marked deterioration in key financial ratios and indicators, including those measuring working capital, contingent liabilities, retained profits and net worth.

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