More than 50,000 NW firms report significant financial distress
More than 50,000 businesses across the region are operating under significant financial distress, according to new data released today (July 24) by insolvency specialist Begbies Traynor.
The latest Red Flag Alert data for the second quarter of 2020 has recorded a nine per cent year-on-year increase in the number of distressed firms in the region.
Since the beginning of the pandemic in the UK an additional 3,357 have fallen into distress, bringing the total to 51,010.
Greater Manchester is now home to 21,442 troubled firms – a year-on-year increase of 10% from 19,524 – while the Merseyside region has 7,413, up from 6,788.
Experts at Begbies Traynor say the rise could have been much higher, were it not for reduced court activity due to the coronavirus pandemic which has substantially reduced the number of CCJs and other legal action being taken against indebted companies.
Key sectors of the North West economy have seen double-digit increase in distress over the past 12 months.
Real estate and property has seen a 20% year-on-year increase (up from 4,782 firms to 5,732), the sports and health clubs sector has seen an 11% increase (from 989 to 1,012) and food and beverages a 12% increase (from 824 to 923).
The shuttering of bars and restaurants has contributed an eight per cent increase in distress in the sector with 1,695 (up from 1,695) teetering on the brink across the region.
Gary Lee, partner at Begbies Traynor, said: “These figures are alarming, but the real pain is likely to begin when the Government furlough scheme is withdrawn, bounce-back loans are spent and the courts reopen for enforcement action.
“This crisis will force many companies out of business.
“The reality is that many businesses across our region are unviable due to high levels of debt and poor sales.
“Company directors must take swift action if they’ve exhausted their Government support options and levels of business continue to decline over the coming weeks.
“We have already seen many businesses restructure their operations and finances and we expect to see more in the months ahead.
“Crisis always creates opportunity and businesses will have to be creative and bold to make changes in order to thrive in the post-COVID climate.
“Entrepreneurs who are able to refinance, adapt their business and create new opportunities to deliver sales in this climate will flourish.”