Begbies Traynor warns Lancashire firms to brace for insolvency storm

Almost 10,000 firms now in significant financial distress – a 2% rise on the quarter says Begbies Traynor Ending of support measures and protection from creditors indicates further trouble ahead. Insolvency rates likely to accelerate further during 2022 and beyond.

Business owners across Lancashire are being warned to brace themselves for a wave of insolvencies this year as state aid and extra protection measures from creditors are phased out.

Figures released today by Begbies Traynor, in its quarterly Red Flag Alert data, confirm that 9,957 firms in Lancashire were operating under significant financial distress in Q4 of 2021 – a 2% rise on the previous three months (9,739).

Nationally, more than half a million firms are now in significant financial distress (589,168) – a 5% rise on the previous quarter. Begbies Traynor also confirmed a 106% rise in the number of County Court Judgements (CCJs) issued in the final quarter of 2021, an early indication of insolvency, as creditors use the courts to recover debts as measures to provide breathing space for companies is withdrawn. The moratorium on landlords being able to evict businesses due to rent arrears is due to be phased out in March.

Chris Lawton, insolvency director at Begbies Traynor in Preston, said: “The combination of furlough ending, loan repayments kicking in, inflation and the increase in companies turning to the courts to recover money they’re owed means we’re likely to see insolvency rates accelerate further during 2022.

“The harsh economic reality of Covid and the rising inflation rate is something that most sectors of our regional economy will have to battle but many, sadly, will lose the fight. With almost 10,000 firms in our region now in significant financial distress the knock-on effect on the supply chain of these firms means everyone in the business community needs to prepare for challenges ahead.

“The figures concerning the construction and property sectors are deeply troubling. More than 2,700 firms operating in these sectors are in trouble and they are a key part of the success of our regional economy here in Lancashire. The poor availability of raw materials and double-digit inflation has had a major impact on their margins. There are solid indications of overtrading as the boom in the sector, post lockdown, continues to cause major cash flow issues.

“Business owners in all sectors will be hoping that the easing of international travel restrictions and the ongoing relaxation of Covid rules will help people and businesses get easier access to goods and services. If they can sense that some normality is returning and they can in turn, conduct business ‘as usual’ they’ll feel brighter about the future. The impact of the return of these normalities remains to be seen.”

TOP TEN DISTRESSED SECTORS IN LANCASHIRE BY VOLUME OF COMPANIES OPERATING UNDER SIGNIFICANT FINANCIAL DISTRESS (Q4 2021 – Red Flag Alert data by Begbies Traynor)

1

Construction

1,468

2

Support Services

1,395

3

Real Estate & Property

1,244

4

General Retailers 

699

5

Professional Services

586

6

Health & Education   

532

7

Telecommunications

531

8

Other Manufacturing

431

9

Automotive

398

10

Bars & Restaurants

393