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Construction North East's least stable sector, says R3

Troubles in the North East construction industry are set to continue, according to the latest findings from insolvency trade body R3.

R3 looks into the levels of business stability in ten key regional industries. Six of the North East’s key sectors, especially hospitality, are outperforming the national average for the proportion of firms with a heightened risk of entering insolvency in the next year.

The construction sector, however, is the least stable of any of the 12 regional peers across the UK, with the proportion of companies with a heightened risk of insolvency being almost three per cent higher than the national average.

Only London has a higher proportion of manufacturing businesses considered at high risk than the North East, while the region’s professional services and agriculture industries are also performing less well than the national average.

The figures are from R3’s latest insolvency risk tracker, which is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.

Neil Harrold, chair of R3 in the North East and a partner with Hay & Kilner Solicitors, explained: “Our latest research reflects a mixed picture for the North East economy, and while there is positive news to report, it’s balanced by some more concerning statistics.

“As well as enjoying fairly decent weather over the summer, there have also been a number of big events taking place across the region that have brought the crowds in, and it seems that our hotels, pubs and restaurants have all done at least respectably well out of them.

“Investment in the leisure sector is continuing apace across the region, with new hotels, bar and restaurants opening on an almost weekly basis, and investors have clearly retained confidence that there are returns to be made for them in these areas.

“Summer usually means a bit of a dip for the construction industry whatever the prevailing conditions, but when commercial pressures have been as prevalent and long-standing as they have been in recent years, even relatively small revenue reductions can have big implications.

“It’s probably too early for the result of the EU referendum to have become a factor in our latest research, but as we move closer towards Brexit, whatever that might end up being, it’s certain that it will have a significant impact on a region which has significant interests in the export market.

“Any company, whether a start up or a well-established business, can find cash flow or other commercial problems arising at any point, and it’s essential for management teams to proactively seek advice from a qualified source as early as they can to give themselves the best possible chance of putting things right.”

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