North East sees both rise in company numbers and risk of insolvency

Since the start of the year the number of active businesses across the North East has risen by just under 2%, whilst the proportion of firms with a raised risk of insolvency rose by 15%.

According to new business stability research by insolvency and restructuring trade body R3, there has been a net increase of 1,518 firms based in the North East since the start of 2018, with the number rising from 79,813 in January to 81,331 this month.

However, the proportion of North East firms with a higher than normal risk of entering insolvency in the next 12 months has also risen to 40%, compared to 34% at the start of the year.

Overall, regional firms in eight of the 11 key industries that R3 monitors currently have a better or identical rate of business stability when compared with the national average, with the cross-sector average for all North East industries (40%) being slightly better than the overall national figure (41%).

The North East restaurant sector has the lowest proportion of companies at higher than normal risk of any region in the UK, while the pub, hotel and agriculture sectors are all in second place in their respective lists.

The region’s transport/haulage and technology/IT sectors remain in fourth position in their respective business stability lists, while the performance of the North East construction sector continues to improve in comparison the rest of the country.

Having been ranked as the region with the highest proportion of companies at heightened risk of insolvency less than a year ago, the North East is now ranked as the fifth most-stable out of the 12 regions in the UK.

However, more than half (51%) of the North East’s professional services firms are now considered to be at higher than normal risk of insolvency, compared to a national average of 48%.

The region’s retail sector also remains one from the bottom of its sectoral table, ahead only of the South West.

Andrew Haslam, chair of R3 in the North East and head of specialist business advisory firm FRP Advisory LLP’s Newcastle office, said: “The North East has never been short of entrepreneurs with big ideas that want to put them into practice, and it’s encouraging to see the number of regional firms continuing to rise in what remains a difficult economic climate.

“However, with the number of companies at heightened risk of insolvency continuing to rise across the board, this net increase in businesses hides an inevitable truth that many regional firms will also have fallen by the wayside this year.

“The relatively strong position of many North East sectors in relation to their peers offers more encouragement, and the imminent start of the Great Exhibition Of The North should mean a further boost for leisure industries which have already been performing consistently well for some considerable time.

“Seeing the North East construction industry making further progress against other regions after such significant difficulties is good news, but the fact that more than half of the firms in our professional services sector are at greater than normal risk of insolvency is very much less so, especially when just 33% were in this position in September last year.

“Problems can arise for any company in any sector at any time, and owner/managers need to remain vigilant to ensure they identify any issues arising at the earliest possible opportunity, so they retain the widest possible range of potential solutions for putting things right again.”