Partner Article

Economic recovery in the North East continues to gain momentum

Recovery in the North East is continuing to gain momentum with businesses in the region showing greater resilience than in many other parts of the UK, according to the Begbies Traynor Red Flag Alert research which monitors the financial health of businesses in the UK.

The latest figures for the third quarter of 2014 show a 2 per cent fall in instances of ‘significant’ financial distress in the North East since the previous quarter while the UK as a whole saw a rise of 1 per cent

Looking at the year on year figures, the North East also performed well with a slight increase in the less advanced significant distress of just 2 per cent, well below the national average of a 10 per cent rise.

Across the UK, there were 240,685 instances of significant financial problems in the third quarter of 2014 and just 5,161 of these were based in the North East.

However, in terms of instances of the more severe ‘critical’ distress, the region showed a less positive picture than the rest of the country with a quarter on quarter rise of 1 per cent compared with a 5 per cent fall across the UK; and a 16 per cent rise year on year in the region compared with a 12 per cent fall nationally.

Across the sectors, there were signs of recovery in some customer-facing sectors in the North East such as bars and restaurants where significant distress fell by 32 per cent since the same period last year; and travel and tourism which saw a fall of 10 per cent.

Distress in the hotels sector appears to have steadied with a rise of just 3 per cent, however, retail continued to face challenging times with significant distress in the region rising by 28 per cent year on year in line with the national trend of a 46 per cent increase.

Interestingly, the figures also showed that the UK’s food retailing industry experienced the sharpest increase in significant financial distress of all sectors monitored, rising 11 per cent the last quarter, both nationally and in the North East.

On an annualised basis, the sector’s fortunes have deteriorated even further, with significant financial distress increasing 53 per cent across the UK and by 36 per cent in the region.

In the North East, significant problems in the construction and real estate sectors continued, rising by 7 per cent and 9 per cent respectively year on year.

Financial services also showed increased significant distress with levels rising by 24 per cent in the North East; and print and packaging rose by 52 per cent.

Partner of Begbies Traynor in the North East, Andy Haslam, said: “While levels of the more advanced critical distress in the last quarter were higher here than in other parts of the UK, this is perhaps due to a recessionary lag with businesses which ran into problems over the last few years finally reaching the end of the line.

“In contrast, it is reassuring to see levels of significant distress, the early signs of financial difficulty, starting to dwindle, indicating that there are decreasing numbers of new instances of distress.”

“Perhaps the greatest risk to our somewhat fragile recovery is the prospect of interest rate rises which many economists are predicting we will see in early 2015.

“Never before has the UK experienced such an extended period of low interest rates and even a small rise is likely to have a massive impact on both businesses and individuals.

“It is vital that directors start planning for these rises now in order to minimise their effect on the bottom line.”

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