North west firms face growing insolvency risk

31-07-2017

The number of north west businesses at risk of insolvency has increased since the start of 2017, according to new research.

Restructuring and trade body R3 has seen the number rise by more than two per cent this year.

Its figures show that 26.6 per cent of businesses in the region are now considered above average risk of becoming insolvent within the next 12 months – equivalent to over 95,000 companies. In January, 24.2 per cent of firms in the north west fell into this category.

Paul Barber of R3

Paul Barber, the north west chairman of R3, said: “In the wake of the election result delivering a hung parliament, and the challenge posed by Brexit, it is not surprising that business risk scores have risen. As it is difficult to plan ahead, decisions get put on hold.

“The consumer-driven momentum that has kept the economy afloat since the Brexit vote is declining, households are experiencing the most protracted squeeze on living standards since the mid-1970s, and businesses are coping with costs of payroll tax, pension enrolments. Meanwhile the rise in inflation is putting pressure on manufacturers.

“Another factor reflected in these risk scores is the growth in the number of start-ups and early-stage businesses which in themselves tend to be more risky than established firms.”

The figures from BvD’s Fame database also show that over 10,000 extra businesses were created between January and July, bringing the total number of active businesses in the north west to over 357,000.

Technology and transport continue to be the highest risk sectors of those monitored by R3, with 33 per cent and 33.3 per cent of firms respectively at risk.

They are followed by professional services, where the number at risk has risen by 1.8 percentage points to reach 30.8 per cent. Other sectors which have seen increase in risk are manufacturing and agriculture

Some sectors saw a decline in risk scores, including hotels, pubs and restaurants and retail.

Mr Barber added: “The leisure sector has performed strongly this year, as consumers seem to be spending on experiences rather than consumer goods, while the fall in the pound has attracted overseas tourists and encouraged Britons to stay at home. Depite problems in some parts of the high street, risk in the retail sector has actually fallen.

“However given the current uncertainty, the economic situation could change fast. Businesses need to remain alert to signs of trouble and ready to adapt to the changing landscape.”

Source - http://www.inthebay.co.uk/inthebay/North-west-firms-face-growing-insolvency-risk-c998d573-8a96-410e-be59-f9f48db3cd8c-ds