Companies across the North East are being warned to brace for difficult times ahead, amid rising numbers of firms experiencing ‘significant’ or early distress.
Business rescue and recovery group Begbies Traynor has published its latest Red Flag Alert data covering the third quarter of 2022, indicating a 4% jump in the number of businesses in ‘significant’ distress in the region compared to the second quarter of the year. The figures also reveal an 8% increase on the same period last year.
The new data shows that in the three months to September, almost 12,000 firms in the North East displayed symptoms of this type of early stage distress – which refers to companies that have financial problems such as minor county court judgements of less than £5,000 filed against them. The regional figures mirror the national picture, which reveals that more than 600,000 firms suffered significant distress in the last quarter.
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Begbies Traynor’s figures also show a rise in the number of firms displaying the more advanced symptoms of critical distress which includes having CCJs of over £5,000 filed against them. They increased by 20% on the previous quarter and by 36% year-on-year. Sectors suffering the most include financial services, representing 30% of all firm, real estate and property (20%), travel and tourism (16%), hotels and accommodation (13%) and telecommunications (12%).
Only five sectors – food and beverages; food and drug retailers; health and education; manufacturing and wholesale – experienced a decline. The concerning data comes as firms continue to face challenges including supply chain issues, escalating gas and electricity prices and shortages of raw materials.
Andrew Little, partner for Begbies Traynor in the North East, said: “There’s no doubt that the economic climate is extremely bleak at the moment and there’s no real end in sight.
“Businesses are now facing a myriad of new challenges. Not only are shortages in raw materials and labour pushing up costs with consumers likely to bear the brunt of rising prices, but there are also supply chain issues, including severe driver shortages and escalating fuel costs. These challenges come at a time when government support measures are being withdrawn and many businesses are also having to start paying back loans.”
The warnings come a week after it emerged that the number of companies filing for administration across the North East and Yorkshire increased by nearly a third in the last quarter.
Analysis of The Gazette data by insolvency specialist Interpath Advisory show 45 firms from the North East and Yorkshire collapsed into administration between July and September, up from 34 in the same period last year. Covid debt fallout, price rises and supply chain issues are among the issues blamed for the steep rise. Wider Insolvency Service statistics also highlighted a 43.4% increase on the number of corporate insolvencies in England and Wales in August, compared with the same month last year.
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