More than 46,000 companies across the North West showed signs of “significant” financial distress at the close of Q1 in 2018, representing a considerable 31 per cent hike on the same time last year, according to research published today by Begbies Traynor.
The quarterly Red Flag Alert data, which monitors the financial health of UK companies, revealed that 46,746 businesses in the region were experiencing significant financial distress at the end of the first quarter of 2018.
Despite the disappointing figures, there was a 3% reduction in the number of North West companies in distress compared to the previous quarter in 2017 (Q4 2017: 48,306) indicating some positive news for firms across the region.
Greater Manchester, Merseyside, and Lancashire all saw a reduction in business distress of 3%, 3% and 4% respectively, but some key sectors have been hard hit.
Sectors with the largest volumes of businesses in distress in the region are Support Services (12,682 - up 47% year-on-year), Construction (6,115 - up 21% year-on-year) and Real Estate (4,005 - up 39% year-on-year).
Across all sectors in the regional economy over the last period Support Services saw the largest increase in distress (up 47%) followed by Telecoms, Media and Financial Services (all up by 43%).
‘Significant distress’ relates to businesses that are displaying what are considered to be the early warning signs of financial difficulty. This includes those that have had minor CCJs filed against them and those displaying a marked deterioration in key financial ratios.
These symptoms may precede ‘critical’ distress which relates to businesses that have winding up petitions or CCJs of more than £5,000 taken out against them.
Gary Lee, partner at Begbies Traynor in Manchester, said:
“More than 46,000 businesses are affected by significant business distress in our region which is a 31% increase since the UK triggered Article 50 to begin the process of exiting the EU. There is uncertainty across all sectors about what the outcome of these negotiations will be but it’s not the only factor in causing these levels of distress.
“Currency fluctuations, low real wage growth, rising interest rates and subdued consumer spending have also all made an impact on the performance of businesses in our region over the past twelve months.
“Economic and political instability is challenging for all SMEs and company directors should seek professional advice if they are concerned about cash flow or the financial health of their business at the first sign of problems.”
"Company directors should seek professional advice if they are concerned about cash flow or the financial health of their business as soon as possible."
Gary Lee, partner, Begbies Traynor in Manchester
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