9,325 firms in Lancashire now in significant financial distress
More than 9,000 businesses across the region are operating under significant financial distress, according to new data released by Begbies Traynor.
The latest Red Flag Alert data for Q2 2020 has recorded a 9% year-on-year increase in the number of distressed firms in the region. Since the beginning of the pandemic in the UK – an additional 629 have fallen into distress bringing the total to 9,325.
Experts at Begbies Traynor in Preston say the rise could have been much higher, was it not for reduced court activity due to the coronavirus pandemic which has substantially reduced the number of CCJs and other legal action being taken against indebted companies.
Key sectors of the regional economy have seen double-digit increase in distress over the past 12 months.
Food & Beverages has seen a 22% year-on-year increase (up from 195 firms to 238), the Sports & Health Clubs sector has seen an 13% increase (from 188 to 213) and Travel & Tourism a 24% increase (from 71 to 88).
The shuttering of bars & restaurants has contributed to a 11% increase in distress in the sector with 334 (up from 302) teetering on the brink across the region.
Ian McCulloch, partner at Begbies Traynor in Preston, said: “These figures are alarming but the real pain is likely to begin when the Government furlough scheme is withdrawn, bounce-back loans are spent and the courts re-open for enforcement action.
“This crisis will force many companies out of business. The reality is that many businesses across our region are unviable due to high levels of debt and poor sales. Company directors must take swift action if they’ve exhausted their Government support options and levels of business continue to decline over the coming weeks.
“On a positive note, we have already seen many businesses restructure their operations and finances and we expect to see more in the months ahead. Crisis always creates opportunity and businesses will have to be creative and bold to make changes in order to thrive in the post-Covid climate. Entrepreneurs who are able to refinance, adapt their business and create new opportunities to deliver sales in this climate will flourish.”
Red Flag Alert has been measuring and reporting corporate financial distress since 2004, and over that time has become an industry benchmark of the underlying health of companies across every sector and region of the UK.
Through its unique algorithm, the Red Flag Alert measures corporate distress signals, drawing on factual legal and financial data from a wide range of relevant sources, including intelligence from the UK’s leading insolvency business, Begbies Traynor.