Red Flag report reveals leisure sector hangover

THE number of regional companies facing severe financial difficulties crept up 1.3% to 23,110 in the last three months of 2014, according to research.

The data from the latest Red Flag Alert report from business turnaround specialist Begbies Traynor reveals that certain sectors, including retail and leisure had a far more torrid time during what is supposed to be their busiest trading period.

For example, the number of North West bars and restaurants in trouble surged 55%, while in Manchester there was a more dramatic 118% jump, compared with the previous quarter.
 
Construction and property companies also had a difficult Q4, with 22%more construction firms, and 17% more real estate and property companies experiencing significant financial problems.
 
Retailers in Manchester also struggled, with 48%more businesses experiencing significant financial problems, although there was a more positive picture in Liverpool and Preston where there were falls of 4% and 14% respectively.
 
Gary Lee, partner at Begbies Traynor in Manchester, said: “Overall the number of companies in the North West facing financial problems has only changed slightly, with 23,110 companies across the region in difficulty compared with 22,815 in the previous quarter.
 
“However, the fact that many bellwether sectors had a difficult end to the calendar year means that many businesses may struggle in the first quarter of 2015.”
 
Two sectors that have had a positive final quarter are professional and financial services, with 19% fewer financial service firms, and 15% fewer professional service companies experiencing problems compared with the third quarter of 2014.
 
Gary added: “A number of reports continue to indicate that North West businesses are becoming less confident about their future prospects. This, combined with increased pressure in the market, may lead to a further slowdown in the economy in the first quarter of 2015.
 
“It is therefore vital that companies start to plan for the future in order to avoid hazards which can have a significant effect on a company’s cash flow or financial situation.
 
“One way to do this is to ensure that the working capital available within the business is adequate as cash rather than profit is all important when managing finances within a challenging business environment.”
 
The Red Flag Alert report identifies the number of businesses facing financial problems and classifies them as either significant, defined as a court action or pending out-of-date accounts, or critical – those with County Court judgements totalling £5,000 or more within a three month period, a winding-up petition or have entered into a Corporate Voluntary Arrangement.