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Birmingham Post
Birmingham Post
Business
Jon Robinson

Hundreds of North West firms in 'critical distress' because of inflation, end of pandemic support schemes and mounting debt

A total of 240 North West companies were in "critical distress" during the first three months of 2022, according to new figures.

Begbies Traynor's Red Flag Alert data said the number was a year-on-year increase of 22%, up from 197.

The data has analysed the health of companies across the region for the last 15 years.

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It also confirms 55,728 remain in "significant distress" with 23,602 being from Greater Manchester and 8,996 from the Liverpool City Region.

This is a 22% drop on the same period last year which was during a national lockdown.

Real estate (7,334), construction (7,328) and support services (9,176) were the three sectors that contained the highest volumes of distressed firms from the 22 analysed in Q1 of 2022.

Begbies Traynor added that the sectors seeing a rapid triple-digit percentage increase in critical distress against the previous quarter include bars and restaurants (217% increase) and food retail (117% increase).

Gary Lee, partner at Begbies Traynor, said: "The triple whammy of inflation, the end of pandemic support schemes and mounting debt is at the root of these levels of financial distress we’re seeing in our region. Most businesses are prepared for costs to continue rising during the remainder of this year.

"All sectors of our regional economy face big challenges in 2022 and company directors will need to act quickly and proactively in the event of a sudden cashflow squeeze or demands from creditors.

"Opportunities will also emerge too for entrepreneurial firms looking to expand. Mergers and acquisitions involving firms who are financially challenged will pick up as the year progresses.

"Consolidation in key sectors such as construction and property in particular shouldn’t be unexpected.

"Businesses with resources will be looking to acquire struggling firms to give them a new lease of life and bolt them on to their existing operations. We’re certainly seeing an increase in appetite for this ‘buy and build’ strategy."

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