Danger over business distress levels across region

Surging numbers of businesses have fallen into ‘critical distress’ according to new figures released today by Preston-based Begbies Traynor (29th April 2022).

The Red Flag Alert data has analysed the health of companies across the region for the last 15 years. It found that 240 firms across the North West were in ‘critical distress’ in Q1 of 2022 – a year-on-year increase of 22 per cent (up from 197).

It also confirms more than 55,000 firms (55,728) remain in ‘significant distress’ with 9,829 of those being based in Lancashire.

Real Estate (1,263), Construction (1,420) and Support Services (1,359) were the three sectors that contained the highest volumes of distressed firms in the Lancashire region from the 22 analysed in Q1 of 2022.

Sectors in the North West region seeing a rapid triple-digit percentage increase in critical distress against the previous quarter (Q4 2021 include Bars & Restaurants (217 per cent increase) and Food Retail (117 per cent increase).

Nationally, more than half a million firms are now in significant financial distress (581,596) and the most recent County Court Judgements (CCJ) data revealed 11,673 of the rulings in March – up 179 per cent on the monthly average for the previous two years – and the highest level in a single month in five years.

Chris Lawton, insolvency director at Begbies Traynor in Preston, said: “Inflation, the end of pandemic support schemes and mounting debts are the three key issues at the root of these levels of financial distress we’re seeing in Lancashire. Most businesses are prepared for costs to continue rising during the remainder of this year.

“All sectors of our local economy face big challenges in 2022 and company directors will need to act quickly and proactively in the event of a sudden cashflow squeeze or demands from creditors.

“Opportunities will emerge for entrepreneurial firms looking to expand because it’s likely that mergers and acquisitions involving firms who are financially challenged will pick up as the year progresses. Consolidation in key sectors in Lancashire such as construction and property in particular shouldn’t be unexpected."