Member Article

North East food and beverage sector struggles as supermarket wars rage on

During Q2 2015, the North East’s food and beverage manufacturers, which include many of the food suppliers and farmers that supply the major UK headquartered supermarkets, witnessed the highest year on year increase in ‘significant’ distress of all sectors monitored in the latest research from Begbies Traynor.

The business recovery specialists has warned that the North East’s smallest food suppliers, independent grocers and farmer are among those to bear the brunt from heightening competitiveness in the retail sector.

According to Begbies Traynor’s Red Flag Alert research for Q2 2015, which monitors the financial health of UK companies, the country’s food retailers are continuing to experience rising ‘significant’ financial distress, increasing 38% across the UK and by 43% in the North East over the past year.

The sector also experienced the largest quarter on quarter rise with a 39% increase in significant distress since the first three months of 2015.

Both small businesses and major supermarkets are feeling the pressure from low-cost German retailers like Aldi and Lidl, which are able to offer a wide range of products at a low price.

Gillian Sayburn, director at Begbies Traynor in Newcastle, said: “Unfortunately the retail environment is set to become even bleaker for the region’s small food suppliers who are facing the harsh reality that price slashing is not just a short term pain but something that’s here to stay.”

Looking at the wider regional picture, levels of ‘significant’ financial distress across all sectors in the North East grew by 13% since the previous quarter, rising from 5,383 to 6,092 businesses. This compares with a rise of 14% across the UK. The year on year figures for the region show that, there was also a 16% increase in significant business distress since the same period in 2014, compared with a 9% rise nationally.

However, levels of the more severe ‘critical’ distress have decreased in the North East, falling by 15% since the first quarter of the year on year (-17% across the UK); and by 34% since the same quarter of 2014, compared with a UK wide fall of 26%.

The consumer-facing industries are among those seeing the most instances of significant distress with hotels and accommodation experiencing a 17% increase since Q1 2015; closely followed by general retail and bars and restaurants both of which rose by 15% quarter on quarter.

Gillian continued: “With the figures for the second quarter of the year showing that significant distress is continuing to rise in the North East, there is a worry that economic growth may slow next year. Rising distress in the retail and leisure sectors is of particular concern as so many businesses in the region depend on rising consumer confidence and spending power.”

This was posted in Bdaily's Members' News section by Ellen Forster .