Business distress may have stabilised in the first three months of this year, according to figures published today.
Analysis by independent business rescue and recovery specialist Begbies Traynor suggests the signs were there in quarter one, but those behind the work are warning the situation is likely to be dramatically reversed as the global economy starts to feel the devastating impact of the war in Ukraine and soaring energy prices.
The latest quarterly Red Flag Alert data from Begbies Traynor reveals a 19 per cent drop in ‘significant’ or early-stage distress in the Humber region, compared to the first quarter of last year when the country was in lockdown, and a 1 per cent fall compared to the final quarter of 2021. It was almost identical to the UK picture.
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Andrew Mackenzie, partner at Begbies Traynor in the Humber region, said: “While at first glance these latest business distress figures seem to paint a relatively stable picture of businesses in the Humber, and the whole of the UK, beginning to emerge from the enormous challenges of the past two years, unfortunately they do not take into account the two most recent global developments that are already beginning to shake the economy to its core.
“The gathering storm of the war in Ukraine, and the sharp rise in energy prices and escalating cost of living crisis which the conflict is set to exacerbate, will inevitably put enormous stress on business across almost every sector. Some firms in our region were already showing signs that they were beginning to struggle in the first three months of this year and unfortunately there is certainly worse to come.
“For small-business owner-managers in particular, it’s now essential to be structurally and financially as well prepared as possible. Seeking advice at the first signs of financial distress is also a wise move and means that more options are available to take positive action.”
In the Humber region, the decline in business distress was seen across the entire economy in the first three months of 2022 compared with 2021. Hotels and accommodation saw a 43 per cent year-on-year fall in financial problems, while distress among professional services firms dropped by 38 per cent and for sport and health clubs by 33 per cent.
In the first quarter of 2022, compared to the final three months of 2021, distress was beginning to increase again for some sectors, so while manufacturing saw a 14 per cent decrease in distress, real estate and property services experienced a 13 per cent rise in financial difficulties and distress among financial services firms was up by 14 per cent.
