Member Article

Election uncertainty stalls North East business growth as investment dries up

Businesses in the North East and across the UK have battened down the hatches since the start of the year, holding back investment for growth and initiating recruitment and pay freezes as they await the outcome of May’s General Election, resulting in a state of stagnation across all areas of the economy, warns business recovery specialists Begbies Traynor.

According to new data released today (20 April) by Begbies Traynor, the North East’s economic recovery stalled in the first three months of the year with levels of significant business distress in the region growing by 1 per cent compared with the previous quarter while the more advanced critical distress grew by 11 per cent since Q4 of 2014.

Begbies Traynor’s Red Flag Alert research for Q1 2015, which monitors the financial health of UK companies, reveals that the region’s performance was slightly worse than the national average which saw a fall of 1 per cent in significant problems across the UK as a whole; and a 4 per cent rise in critical problems quarter on quarter.

Looking at the year on year figures, significant problems in the North East grew by 2 per cent, compared with a 1 per cent increase nationally; however, critical problems in the region fell by 30 per cent, compared with a 20 per cent fall across the UK.

Across the UK, there were 227,993 instances of significant financial problems in the first quarter of 2015 and just 5,383 of these were based in the North East.

A number of key sectors in the North East experienced an increase in significant distress compared with the same period the previous year including food and beverage manufacturing (100 per cent increase); construction (up by 45 per cent); and general retailing (34 per cent rise).

However, there were some optimistic signs in the region with significant distress in leisure falling by 29 per cent; transport and logistics falling by 27 per cent; and hotels by 18 per cent.

Andy Haslam, partner for Begbies Traynor in the North East, said: “Concerns over the outcome of the most uncertain election in a generation have led to a state of stagnation across a number of sectors of the economy with many North East businesses postponing their growth plans until after the results have been announced.”

“After a strong economic performance in the first half of 2014, the political turmoil appears to have slowed the recovery this year and the fear is that an inconclusive result in May could cause further disruption as businesses face another month of uncertainty.”