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Instability rising across almost all North East business sectors, finds report

The latest business stability rankings from insolvency and restructuring trade body R3 suggest the risk of North East firms getting into financial difficulty in the next year are rising across almost every business sector.

Nine of the 11 industry sectors that R3 monitors on a monthly basis have seen the proportion of firms therein with a heightened risk of going insolvent go up in the last month. with only the transport/haulage sector recording a reduction (down by four per cent) and the risk in the tourism operators sector staying the same.

The leisure sector has seen the biggest changes, with the insolvency risk in the hotel and pub sectors rising month-on-month by 11 and five per cent respectively.

The manufacturing and technology sectors both saw their insolvency risk rise by four per cent over the same period, while retail, construction, retail, restaurant and professional services sectors all recorded rises of between two and three per cent.

On the upside, and despite last month’s rise, the region’s restaurant sector still has the lowest risk of getting into financial difficulty in the next year of any such businesses anywhere in the UK, while the North East’s pub industry is in better overall shape than any of its rivals across England.

Overall, regional businesses in six of the 11 key industries that R3 monitors currently have a better rate of business stability than the national average for their respective sectors, with the North East’s technology, professional services and transport businesses all in this position.

The North East construction sector remain the least stable of any of the 12 regional peers across the UK, while the region’s retail, manufacturing and agriculture sectors are all faring worse than their respective national averages, as has been the case for several months.

Overall, just over a quarter (26%) of all North East businesses have a heightened risk of entering insolvency in the next year, which is the same as this month’s cross-sector national average.

R3’s insolvency risk tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.

Neil Harrold, chair of R3 in the North East and a partner with Hay & Kilner Law Firm, says: “If you asked company owners what the one thing they most wanted to help them plan their businesses’ progression, the answer is very likely to be ‘certainty’, but that’s a commodity that is in very short supply at the moment for a number of reasons and it may be having an impact on confidence across the regional economy.

“While the rise in insolvency risk is relatively small across most industries and there are encouraging signs in some sectors, it’s crucial for company owners to remember that financial problems can hit any business in any industry at any time, and in uncertain times like these, retaining full oversight of their operations is essential if they’re to be able to see any warning signs flashing before it’s too late to do anything about them.

“Management teams that feel they could be facing problems need to take action straight away and get qualified advice if they want to have the best possible chance of putting things right, rather than ignoring the situation in the hope that everything will somehow work itself out again.”

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