Company formations - and financial distress - increases in North West

New research has shown that the number of new companies being formed is on the increase - as is the number facing financial distress.

R3, the UK’s insolvency and restructuring trade body, analysed data provided by Creditsafe and found that 80,404 firms were set-up in the North West in 2023 – a rise of 7.7 per cent from 2022’s total of 74,658.

North West start-up numbers were at their highest in March 2023 in the North West, when 7,390 new firms were set up.

Fran Henshaw, chair of R3 in the North West, and head of corporate recovery and insolvency at Beever and Struthers, saud: “Amidst tough economic challenges like high inflation, persistently higher interest rates, and supply chain issues, tens of thousands of entrepreneurs in the North West embraced the opportunity to launch new businesses last year.

"Many of these new ventures are micro and small businesses, owned and run by local people, and will play a crucial role in supporting the growth of the North West economy in the year ahead."

Meanwhile, Begbies Traynor has found that the number of Lancashire firms who have started 2024 on the brink has now surged past 10,000.

In Q4 of 2023, the number of firms in Lancashire operating in ‘significant’ financial distress was 10,599 according to the research. This is a year-on-year increase of 12.09 per cent (up from 9,456) and a quarterly jump of 13.69 per cent (up from 9,323).

This latest data is sourced from the Begbies Traynor Red Flag dataset which tracks key factors behind company distress and failure rates.

‘Significant distress’ refers to businesses showing deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.

The biggest double-digit percentage leaps in distress compared to the previous quarter were seen in printing and packaging (52 per cent), utilities (33 per cent) and industrial transportation and logistics (31 per cent).

The largest volume of distressed businesses are found in the quartet of key economic sector hubs in the Lancashire region: construction, real estate, support services and professional services which, together, make up almost half (49 per cent) of the total (5,178) number of significantly distressed firms.

Chris Lawton, partner at Begbies Traynor in Preston, said: “2024 has been a challenging start for SMEs in our region. There’s no doubt that the build-up of pressure from last year continues to have a major impact and this latest data demonstrates the size of the problem for businesses in Lancashire.

“Recent inflation figures announced compound the threats even further for business owners struggling to stay on top of things as those in their supply chain pass greater costs on in order to survive.

“The fact that more than half of these companies in significant distress operate in the traditionally strong sectors of construction, property, professional and support services is of grave concern for everyone doing business in these areas.

“With a General Election looming later this year, it is feasible we could see further support for businesses being announced in the next Budget."