More firms are struggling says Begbies

THE number of North West businesses in financial distress rose 25% during the third quarter, according to the latest Red Flag Alert research from accountancy group Begbies Traynor.

There was a total of 21,819 businesses with either significant or critical problems during the three months to the end of September 2013, up 25% on the second quarter.

During the period GDP growth was up 0.8% suggesting a more robust economic environment.

The Red Flag report identifies and tracks the numbers of businesses facing financial problems and classifies them as either significant – defined as a court action pending or poor or out-of-date accounts – or critical – those with County Court Judgments totalling £5,000 or more, a winding-up petition or being in a voluntary arrangement.

While companies facing critical distress fell 7% to 335, but those with significant problems rose by 26%. Property and construction businesses featured heavily, but professional services is also struggling with some 1,561 companies highlighted as having significant or critical problems.

Gary Lee, partner at Begbies Traynor, said: “The Red Flag Alert findings on Professional Services are sadly, not unexpected. Typically, in times of economic insecurity, companies will be working for clients on reduced budgets. More so, they will be winning work with little, and in some extreme cases, no margin, just to keep busy. This is particularly true of the region’s legal sector and the findings indicate that the effect of this is starting to seep through.”

Year-on-year figures show a 5% decrease in those with significant problems and a 28% decrease in the critical category.

Mr Lee added: “Despite this quarterly bump, the North West’s economy is still moving in the right direction, albeit slowly. What it needs now is for more businesses to take a longer term view and show a returned confidence. For some it may feel premature, but starting to spend cash reserves to invest in assets will give the city’s economy that extra push in the right direction.”