The North East is seeing significant numbers of firms in financial distress despite bucking some national trends, a new report reveals.
The Red Flag Alert data from law firm Begbies Traynor reveals that the number of firms in the North East in ‘critical’ distress - which refers to companies that have financial problems such as court judgements of more than £5,000 filed against them - rose by 10% in the second quarter of the year compared with the same period the previous year, though this was below the national rate and a fall on the first quarter of this year.
The number of firms facing ‘significant’ distress fell year-on-year, but the Begbies’ figures show that more than 11,300 businesses in the region were showing early stage distress between April and June. Problems were seen particularly in the travel and tourism, utilities and printing sectors.
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Gillian Sayburn, a partner for Begbies Traynor in the North East, said: “While these latest figures are not as bad as might be expected given the escalating cost of living crisis, there is a very real concern that they mask the real strain of inflation with the full impact yet to be felt.
“Already, the latest GDP figures for May have shown a decline in consumer-facing services with a fall in retail sales and sports activities and recreation. With many people starting to feel pressure to pay household bills and the prospect of further energy rises in the coming months, businesses are likely to feel the impact as consumers rein in discretionary spending.
“As ever, we advise directors to monitor cash flow carefully and seek professional advice as soon as they become aware of financial difficulties.”
Last week, the OECD warned that sluggish productivity across the UK as well as regional and gender disparities were slowing economic growth.
And the Federation of Small Businesses has warned of rising problems for business owners, with chair Martin McTague saying: “Many members are reporting mushrooming energy bills multiplying by four or five times in recent months.
Small business energy customers don’t benefit from consumer protections, nor do they have the negotiating power of their larger counterparts, making utility bill inflation especially tricky to handle. Struggling micro-businesses should be offered help on energy costs to match that being given to households.
“The Government should also be looking at other measures to ease soaring costs of doing business, such as a reversal of the hike in National Insurance, cutting VAT and fuel duty, and introducing new reliefs on business rates.”
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