Member Article

North East businesses see rise in financial distress

North East businesses see rise in ’significant’ financial distress

Businesses in the North East are continuing to face tough challenges with the latest data revealing that in the last quarter of 2015 levels of ‘significant’ financial distress rose by 19% compared with the same period the previous year, even higher than the national figure showing a 17% rise.

According to Begbies Traynor’s Red Flag Alert research for Q4 2015 which monitors the financial health of UK companies, 268,898 UK companies closed the year suffering the most common medium term indicators of ‘significant’ distress, 6,333 of these were in the North East. Leading independent insolvency firm Begbies Traynor warns that this is the most marked annual rise in distress across the UK since Q2 2014. In the North East, the more serious ‘critical’ instances (these include CCJs totalling over £5,000 or winding-up petitions) also increased by 11% year on year, this compares with a national fall of 4%.

While the North East showed one of the highest rises in ‘significant’ distress year on year, levels of distress since the previous three months reflected the national picture with an 11% rise. Instances of ‘critical’ distress in the region rose by just 3% since the previous quarter compared with a 12% rise across the UK. Gillian Sayburn, director at Begbies Traynor’s office in Newcastle upon Tyne, said: “This latest research shows that despite improvements to the economy in 2015, businesses in the region and, indeed, across the UK are still facing challenging conditions. We saw manufacturing weakened significantly as a result of continued sluggish growth in Europe, while labour shortages and building materials inflation continued to plague the construction sector.

“With so many companies beginning the New Year in such a poor financial state, it is vital that businesses adopt a proactive approach, both in terms of managing their cost bases while also driving expansion in a low growth environment.”

The research reveals that most sectors of the economy saw an increase in financial distress over the past 12 months, both in the North East and nationally. Among the worst performing sectors in the region were leisure with a 44% year on year rise in significant distress; transport (37% rise); hotels (36% rise); real estate (26% rise); bars and restaurants (21% rise); and financial services (18% rise).

This was posted in Bdaily's Members' News section by Emma Kilmurray .