Hotel sector stands resolute against the threat of insolvency

The number of West Midlands companies at an elevated risk of insolvency is now at a 2017 high, restructuring and insolvency trade body R3 has said.

There are significant increases recorded across each of the 11 key businesses sectors monitored by organisation.

R3’s December statistics, compiled using Bureau Van Dijk’s Fame database, highlight that almost one-in-three businesses in the region – 31.6% – are now in the elevated insolvency risk band, which is equivalent to around 87,800 companies.

This is an increase of eight percentage points on the figures at the start of this year, when around 62,800 regional businesses faced an elevated likelihood of insolvency.

Of the key West Midlands business sectors monitored by R3 – which include manufacturing, retail, construction, tourism operators, pubs and hotels – technology and IT, and transport and haulage contain the highest percentage of struggling businesses.

Two-in-five (39.6% and 39.2%, respectively) of all businesses in these two sectors now carry an above average possibility of insolvency.

The West Midlands sector proving to be more financially stable than the others being monitored by R3 is hotels. This is despite its insolvency risk increasing by 7.4% on last month’s figure – a 2017 high – and the number of hotels in the elevated risk band rising from 141 to 150, which is around one-in-four (24.3%).

The West Midlands manufacturing sector has the region’s second lowest proportion of companies at greater than normal risk of financial failure, at around one-in-four (24.4%). This equates to 4,700 local businesses in the negative risk band – a rise of 8.4% on last month’s total.

R3 Midlands chairman Chris Radford, a partner at Gateley in Birmingham, said: “It is encouraging to see conference tourism giving comparative stability to many West Midlands hotels, and the local manufacturing sector seizing available business opportunities.

“Overall, the R3 research does not provide the best of news on which to end the year. It does, however, give focus to the importance of monitoring company finances carefully and planning for every eventuality.

“In 2018, local companies will face what can only be described as a ‘perfect storm’ of potential challenges. Brexit, the National Living Wage, inflation, exchange rate fluctuations and increases in rent and rates are only a few of the possible factors which could trip up firms not prepared to face them.”

He said firms teetering on the bring needed to take professional advice as soon as possible.