Rising distress rates ringing alarm bells for North West firms
There has been a 20% increase in North West companies in significant financial distress, new figures from insolvency experts Begbies Traynor show today (January 24).
The firm said the stats reveal businesses are still battling the legacy impact of COVID debt and are deeply troubled by inflation.
Begbies Traynor revealed that 57,003 businesses are now on the brink and operating under significant financial distress – a 20% rise from the same pre-pandemic period in 2019 (47,653).
It also found that 286 firms in the region were in ‘critical distress’ in the fourth quarter of of 2022 – a single year increase of 20%, up from 239.
The Red Flag Alert data, published by Begbies Traynor, has analysed the health of companies across the region for more than 15 years.
Of the firms in significant distress, 24,717 are from Greater Manchester and 9,226 are based in the Liverpool City Region.
Nationally, 610,405 firms are now in significant financial distress.
Gary Lee, partner at Begbies Traynor, said: “The difference between pre-pandemic business conditions and now is stark.
“These figures highlight the gloom in the economic climate since the pandemic. Company directors must stay alert and act quickly and decisively as we progress into 2023, which is already bringing its own challenges.
“The conversations we’re having with company directors in the North West indicate these challenges are being faced in all sectors of our regional economy.
“It’s clear that business owners are working hard to tackle rising inflation, soaring energy bills and doing their best to ward off the impact of what looks like a looming global recession, but in too many cases it won’t be enough.
“The scenes of industrial action being taken in the public sector symbolise the strain felt by those in the private sector, too, who are under pressure to deliver pay rises where revenues are flatlining, or even declining.”
He added: “It will not be unexpected to see further cutbacks on goods and services in some key sectors of our regional economy.
“The challenge for businesses is to remain competitive and they should plan strategically through further financial strain by restructuring their organisation or their debts. As interest rates rise and a less generous energy support scheme kicks in, there is more pain to come for SME’s in the region.”
The top 10 sectors in significant financial distress by volume of firms based in the North West: 1. Support Services (9,477); 2 Real Estate & Property (8,218); 3. Construction (7,295); 4. Professional Services (3,897); 5. General Retailers (3,763); 6. Telecoms (3,265); 7. Health and Education (3,253); 8. Manufacturing (2,036); 9. Media (1,891); 10. Bars and Restaurants (1,864).