Sharp increase in number of Lancashire firms in financial distress

The number of Lancashire-based firms in significant financial distress has increased by 43 per cent over the last year.

A new report issued by Preston-based Begbies Traynor shows that in the second quarter of 2024, the number of firms in the county which have triggered its 'red flag' warning has increased from 8,481 last year to 12,124.

This has outpaced the national overage, where more than 601,950 face financial challenges, an increase of 37 per cent.

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

‘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 figures indicate that people remain adamant in pulling back spend on food, clothing and leisure as families’ spending power continues to shrink.

Sports and Health Clubs saw a 62% increase in distress (up to 258 businesses), General Retailers a 50% increase (to 1,025 shops) and the Bar & Restaurant sector saw a 61% hike in distress (to 417 outlets).

By far, the largest volume of distressed businesses are found in the quartet of what are often considered to be the core economic sector hubs of the Lancashire region: Construction, Real Estate, Support Services and Professional Services which, together, make up more than half of the total number of significantly distressed firms.

Chris Lawton, partner at Begbies Traynor in Preston, said: “These are sobering figures indeed but those in the thick of doing business in our region will not be surprised. They recognise that things are extremely tough not only for their own firm but for those they are doing business with every single day.

“The figures relate to the final quarter of the previous government and naturally, since July 4 and the election of a new government, business owners will now be anxiously looking for any new business-friendly measures to be implemented quickly so they can recover and prosper in the second half of the year.

“There is no hiding the fact that a vast number of consumers are still actively seeking to reduce household spend on a daily basis. Inflation and wage stagnation has a huge impact on the fortunes of businesses operating in every sector of our regional and national economy. 

“It is deeply concerning that Lancashire’s ‘golden quartet’ of sectors make up more than half of all the distressed businesses in our region and keeping a close eye on how they progress in 2024 will be absolutely essential for all of us."