Rise in North West firms in ‘critical distress’ during first quarter
More North West firms have slipped into ‘critical distress’ during the first quarter of 2022, but the region has witnessed a fall in the amount of companies deemed to be in ‘significant distress’.
Manchester-based insolvency specialist Begbies Traynor today (April 28) published its latest Red Flag Alert, which has analysed the health of companies across the region for the past 15 years.
The latest report found that 240 firms were in ‘critical distress’ in the first three months of 2022 – a year-on-year increase of 22%.
It also confirms that 55,728 firms remain in ‘significant distress’ with 23,602 being from Greater Manchester and 8,996 from the Liverpool City Region.
This is a 22% drop on the same period last year – when 70,496 were judged to be in ‘significant distress’ – which was during a national lockdown.
Real estate (7,334), construction (7,328) and support services (9,176) were the three sectors that contained the highest volumes of distressed firms from the 22 analysed in first quarter of 2022.
Sectors seeing a rapid triple-digit percentage increase in critical distress against the previous quarter include bars and restaurants (217% increase) and food retail (117% increase).
Nationally, more than half a million firms are now in significant financial distress (581,596) and the most recent County Court Judgements (CCJ) data revealed 11,673 the rulings in March – up 179% on the monthly average for the previous two years – and the highest level in a single month in five years.
Gary Lee, partner at Begbies Traynor, said: “The triple whammy of inflation, the end of pandemic support schemes and mounting debt is at the root of these levels of financial distress we’re seeing in our region.
“Most businesses are prepared for costs to continue rising during the remainder of this year.”
He added: “All sectors of our regional economy face big challenges in 2022 and company directors will need to act quickly and proactively in the event of a sudden cashflow squeeze or demands from creditors.
“Opportunities will also emerge, too, for entrepreneurial firms looking to expand. Mergers and acquisitions involving firms who are financially challenged will pick up as the year progresses. Consolidation in key sectors, such as construction and property in particular, shouldn’t be unexpected.
“Businesses with resources will be looking to acquire struggling firms to give them a new lease of life and bolt them on to their existing operations. We’re certainly seeing an increase in appetite for this ‘buy and build’ strategy.”
