Warning for directors as more than 10,000 Lancashire companies on the brink

More than 10,000 businesses in Lancashire are now in significant financial distress, according to new research published today by Begbies Traynor. 

The latest Red Flag Alert research for Q4 2020 has recorded 10,863 businesses in ‘significant distress’. This 8% increase (from 10,034 in Q3 2020) comes as the regional economy battles the third nationwide lockdown. 

The research also confirms a 25% year-on-year increase in significantly distressed companies since Q4 2019 (8,696 - Q4 2019, 10,863 - Q4 2020).

Distress in the industrial transportation sector increased by 48% (from 210 in Q4 2019 to 310 in Q4 2020), real estate and property services saw an increase of 33% (907 to 1,208) and distress for hotels and accommodation increased by 40% (113 to 158). 

Every single one of the 22 sectors monitored by the Red Flag Alert research exhibited an increase in significant distress, with 7 sectors experiencing double digit increases in the final quarter of 2020 - a worrying sign for the regional economy.

Ian McCulloch, partner at Begbies Traynor in Preston, said: “These figures highlight the deteriorating financial situation for many companies across our region. Without the financial aid and support measures that the Government has put in place during the pandemic insolvency levels would have been much higher. The sad truth is that for many companies this will provide little more than a stay of execution as debt levels become unmanageable and structural changes across many sectors take their toll.

“A national lockdown policy with no concrete end in sight does little to help worried business owners and their finance directors.

“The pandemic has actually reduced court activity by limiting the number of CCJs and winding up petitions being issued against indebted companies and there has been a ban on winding up petitions for Covid-related debts so the situation could get even worse when the courts eventually open up fully.

“Company directors who are running a distressed business must explore all their restructuring options now if they are to survive. Getting together a proactive creditor strategy, fresh re-financing package or a tax efficient disposal of the business needs to be high on the boardroom agenda to survive the weeks and months ahead. 

“The roll-out of the vaccine offers some light at the end of tunnel but the financial situation for many businesses will remain bleak over the next quarter and beyond," added McCulloch.