Member Article

Mixed picture for business distress in the North East

Fewer North East business experienced ‘critical’ financial distress in the final quarter of 2013 than in the same period, the year before.

A study of regional corporate recovery statistics by Begbies Traynor showed that while severe levels of financial distress decreased year-on-year, levels rose by 21% on the quarter.

Consumer-facing sectors in the region showed more signs of faltering including bars and restaurants and hotels and accommodation.

The North East retail sector showed a year-on-year increase in distress of 31%.

Andy Haslam, partner of Begbies Traynor in the North East, commented: “It is encouraging to see some signs that business confidence is increasing and that the recovery is making slow, but steady progress both here and across the UK.

“However, the 21 per cent increase in instances of critical distress quarter on quarter may indicate that while the regional economy has undergone a dramatic improvement over the last 12 months, there could be another spike in insolvencies ahead of us.

“With earlier stage ‘significant’ distress continuing to increase in some sectors in the region this quarter, we are seeing growing fragility particularly among the small businesses community, as smaller and newer companies struggle to keep up as the economic recovery gathers pace.

“As is common at this stage of any recovery process, businesses with inexperienced management teams or limited credit availability are simply unprepared to step up a gear and fund and execute the business strategies required to remain competitive in a growing market. Such businesses will need to take urgent action to avoid slipping into more critical distress and to ensure they are well placed to take advantage of the economic recovery.

“These latest figures show that the economy is still moving in the right direction and businesses are generally feeling more confident about their outlook for 2014, helped by strengthening property prices, improving job security and wage inflation.

“While this positive sentiment is encouraging, we cannot overlook the fact that a large population of businesses continue to suffer from ‘significant’ distress resulting from funding, management or accumulated debt issues. The next year will be a key period for these businesses to either sort out their problems and prosper or finally reach the end of the road.”

This was posted in Bdaily's Members' News section by Tom Keighley .