North East manufacturers buck national trend for problems

The North East’s longstanding manufacturing sector is showing its resilience after new research by the insolvency trade body R3 revealed that the region has the lowest proportion of such businesses facing serious commercial concerns in the UK.

Just under one in five (19 per cent) of the north east’s manufacturing businesses (531 out of 2,853 firms) are currently ‘at risk’ of failure, meaning the situation in the region is more positive than in every other part of the UK.

Currently 22% of UK manufacturing firms are ‘at risk’ of failure, with far higher proportions being identified in locations such as London (29%) and the South East (23%).

R3’s research comes in the wake of the announcement last month by the region’s highest profile manufacturer, Nissan, of plans to extend its Wearside plant, which is already Britain’s biggest car manufacturing facility.

The latest Markit/CIPS Purchasing Managers’ Index, which assesses the performance of the UK manufacturing sector on a monthly basis, also showed that factory output grew at its fastest rate for almost two decades during August.

R3 compiled the research using Bureau Van Dijk’s ‘Fame Database’ of company information.

Steve Ross, chair of R3 in the north east and a partner in the Restructuring department of the Sunderland office of accountancy firm RSM Tenon, says: “Despite hearing many times over the years about the death of the north east manufacturing sector, it has always been a key constituent part of the regional economy, and while conditions clearly remain challenging, its resilience is very much highlighted by comparisons to other parts of the UK.

“While major names such as Nissan are the standard bearers, there are hundreds of other manufacturers right across the north east that are trading well, winning new contracts, sustaining and creating employment, and maintaining a proud regional industrial heritage that goes back centuries.

“As with any business that might be facing financial difficulties, the best way for any struggling manufacturers to address them is to get advice from a qualified source as soon as problems become apparent and agreeing what needs to change to improve the situation, rather than just waiting and hoping that they’ll go away on their own.

“Taking this sort of proactive action is the most likely route towards addressing and resolving their companies’ problems, and getting them back into the right shape for recovery.”

The R3 report also shows that a further 2.8% (80 companies) of north east manufacturing businesses face a ‘high risk’ of failure and may have difficulties in continuing to trade unless significant remedial action is taken.

However, this is once again the best figure in any part of the UK, below the national figure of 3.5%, and well ahead of the figures for London (4.7%), the North West (3.7%) and Scotland and the South East (both 3.6%).

RS compile the data using Bureau Van Dijk’s ‘Fame’ database. ‘At risk of failure’ is defined as a company that has a QuiScore below the normal band. The QuiScore is a measure of the likelihood of company failure in the twelve months following the date of calculation.