Member Article

North East business distress falls by 20%

Levels of business distress in the North East have fallen year on year by 20% for the first quarter of 2012, according to a recent survey.

The Begbies Traynor Red Flag Alert report indicated that ‘significant’ problems have fallen by a fifth when compared with the same period in 2011, but more advanced ‘critical’ problems also grew by 25%, a figure representing the aftermath of distress experienced last year.

Combined instances of business distress in the region rose by 44% as a result of seasonal trends mirroring previous years, and were still lower than the national average of 55%.

Across the whole of the UK, 154,370 companies showed instances of ‘significant’ or ‘critical’ financial problems during the quarter, of which 3,589 are based in the North East.

Commenting on the figures, Andrew Haslam, regional managing partner for Begbies Traynor said: “The latest year on year figures are encouraging, indicating slow but distinct progress away from another recession a led by the manufacturing sector, aided by low interest rates and a competitive pound.

“Manufacturing is the star of the economy at present and the engine that could drive a recovery.

“Indeed food and beverage manufacturing was the only sector to see falls in both year-on-year and quarter-on-quarter distress and with our strong manufacturing base in the North East, we are hopeful that the region will benefit from this.”

Due to tough seasonal trading conditions, retail and construction have yet to witness any further improvements, but the overall fall in distress compared with 12 months ago is a sign of some momentum towards a recovery.

In the region, manufacturing saw significant distress fall from 4% in Q1 2011 to 2% in Q1 2012, while food and beverage, print and packaging manufacturers accounted for almost no distress.

By contrast, construction was one of the hardest hit areas, witnessing 15% of the total instances of distress, while property services accounted for 9% of instances of distress.

While these figures indicated that private sector manufacturers are leading economic growth, public sector spending cuts continue to affect many as long term infrastructure and construction plans are put on hold.

Mr Haslam continued: “We have seen numerous construction firms, contractors and suppliers restructure and withdraw from markets recently, and there are concerns that the impact of the sustained spending freeze on this sector is being masked by the fact that many sub-contractors are not immediately counted in government unemployment numbers.

“There is a great deal of consolidation and contraction still to come in this sector, and this will leave the region short of capacity when the spending constraints loosen and projects are back on the horizon again.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .