11,000 Lancashire businesses in financial distress, but recovery has been detected

New research from Begbies Traynor reveals that more than 11,000 businesses in Lancashire are currently experiencing ‘significant final distress’ – a 21 per cent increase on the same time last year. 

11,254 businesses located in the region are now operating under significant financial distress according to the latest Red Flag Alert data for Q2 2021. The quarterly research, produced by Begbies Traynor monitors the levels of financial distress experienced by companies in Lancashire. 

However, the re-opening of the economy made an instant positive impact on the fortunes of firms across the region with an 12 per cent reduction in the number of firms in distress compared to the previous quarter (Q1 2021 saw 12,810 firms from across the region in significant financial distress compared to Q2 2021 which saw 11,254).

Sectors with the highest level of distress in the region by sheer volume of companies are Support Services (1,586– a 25 per cent rise on last year), Construction (1,657 – a 20 per cent rise on last year) and Real Estate & Property (1,277 – a 27 per cent rise on last year). 

However, it is worth noting that all three of these key regional business sectors saw recovery in Q2 of 2021 compared to Q1 of 2021. Support Services saw a quarterly decrease in distress of 10 per cent, Construction saw a 10 per cent reduction and Real Estate & Property a 6 per cent reduction. 

Nationally, there are now 651,492 firms who are currently in significant financial distress which is a 24 per cent increase on the same time last year (526,967). 

Chris Lawton, insolvency director at Begbies Traynor in Preston, said: “The 12 per cent reduction in businesses who are experiencing significant financial distress is certainly welcome news for all business owners and employees in our region. 

“We’re not quite out of the woods yet though and the hard fact remains that there are more than 10,000 companies in Lancashire who still face significant financial challenges. That number will be of major concern not only to the company directors running those firms but to other businesses connected to them in the supply chain.

“With recent changes to the UK roadmap out of lockdown and ongoing uncertainties related to the ‘pingdemic’ issue many companies are still in a precarious position. Sadly, any further lockdowns or restrictions introduced later this year could well be the final straw for many of them. 

“The ongoing servicing of existing commercial finance arrangements coupled with fresh debt repayments kicking in from bounceback loans and CBILs means it’s likely to be a chanllenging summer for many businesses across our region.”