North East business distress stabilises following Brexit vote

The number of North East companies experiencing early signs of business distress stabilised in the three months following the UK’s surprise decision to leave the EU.

New data from business recovery firm Begbies Traynor found that there were 5,409 enterprises in the region showing ‘significant’ distress’ in Q3 2016, down by 4% against Q2’s figures.

For the rest of the UK the decrease was more marked, with the national fall standing at 6%.

Despite the dip, the number of North East firms experiencing business distress in Q3 was up year on year by 4%.

In terms of ‘critical’ distress – a more advanced sign of financial problems – the North East saw a 2% quarter-on-quarter increase, in comparison to a UK-wide fall of 2%.

Multiple sectors showed a quarter-on-quarter fall in significant distress in the region, while transport and utilities rose by 7% and 3% respectively, as did printing (2%) and media (1%).

The worst-hit sectors were found to be utilities (25%), financial services (15%), sport and health (13%) and manufacturing (8%).

Begbies Traynor director Gillian Sayburn, who is based at the firm’s Newcastle office, said: “It’s positive news that despite the initial panic immediately following the EU referendum, fears seems to have lessened somewhat and, in fact, the business distress in the North East has seen a slight fall quarter on quarter, although this may be due to seasonal factors as it is still markedly higher than the same period the previous year.

“While many people seem to be convincing themselves that it’s ‘business as usual’, we fear that this may prove to be only a temporary reprieve with continuing turmoil for sterling indicating the markets’ falling confidence in prospects for the UK economy.”

She continued: “Unfortunately, whatever happens, Britain is facing a period of prolonged uncertainty in the run-up to the expected triggering of Article 50 in 2017 and the protracted and complex Brexit negotiations which will follow.

“With most businesses needing a secure environment in order to flourish, SMEs need to proceed with caution and prepare themselves for a bumpy ride as the UK navigates its way through unknown waters.”

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