New report reveals decrease in 'business distress' across region

  • 13 per cent decrease in financial distress in region compared to previous quarter
  • Evidence of economic recovery – but almost 10,000 firms remain in distress
  • Warning over 139 per cent rise in CCJ’s during Q3 2021 as businesses resort to courts to recover debts

New research from Begbies Traynor in Preston reveals a 13 per cent reduction in business distress in Q3 of 2021 compared to the previous quarter – but confirms that almost 10,000 firms in Lancashire still face significant financial challenges.

9,739 businesses located in the region are now operating under significant financial distress according to the latest Red Flag Alert data for Q3 2021. The quarterly research, produced by Begbies Traynor monitors the levels of financial distress experienced by companies across Lancashire.

The gradual re-opening of the economy and steady increase in consumer confidence is reflected in the latest figures with a 13 per cent reduction in the number of firms in distress compared to the previous quarter (Q2 2021 saw 11,254 firms from across the region in significant financial distress compared to Q3 2021 which saw 9,739).

Notable double-digit reductions in distress were seen across Lancashire in Construction (15 per cent reduction), Industrial Transportation (23 per cent and Health & Education (17 per cent).

Some sectors of the regional economy still retain high volumes of distress in the region by sheer volume. These are Support Services (1,332), Construction (1,408) and Real Estate & Property (1,163).

Nationally, there are now more than half a million firms (562,550) who are currently in significant financial distress. CCJ’s are often a bellwether for insolvency and the latest data paints a gloomy picture. Official data shows there were 9,101 CCJs lodged against companies during Q3 2020, rising to 21,769 during Q3 2021 – a 139 per cent increase. This acceleration in CCJ’s was also evident between Q2 and Q3 2021 with a 51 per cent uplift.

These figures show that court activity is picking up as creditors, especially landlords, become more aggressive in chasing debts.

Chris Lawton, insolvency director at Begbies Traynor in Preston, said: “The percentage fall in business distress across the region is certainly good news and gives directors some breathing space as they recover from the pandemic. However, the sheer number of firms still in financial peril is worrying. Every day we’re having conversations with business owners and their advisers and the same two issues keep cropping up.

"Firstly, there are huge challenges for many companies in repaying bounceback loans they’ve taken out. Secondly, creditors, including HMRC and landlords are taking an increasingly aggressive line in chasing debts. The pressure is still on for thousands of businesses and we’re likely to see an acceleration of insolvency rates in 2022 as funds dry up and directors have exhausted their options. Company directors who find their business in financial distress should take swift action before their options run out.”