Member Article

Business distress in the North East soars by 15% as hundreds more firms plunge into financial trouble since June

Financial distress is increasing exponentially across the North East’s economy with many industry sectors experiencing a substantial rise in the early signs of financial difficulties since the previous quarter, according to the latest research from leading independent insolvency and restructuring business advisory firm Begbies Traynor.

Published today (29 October 2020), the Red Flag Alert data from Begbies Traynor reveals that nearly 700 more businesses in the region were experiencing ‘significant’ distress, the early signs of financial trouble, by the end of September than at the end of the second quarter of 2020 in June. Year on year, almost 1,500 more North East businesses were in this type of distress, equating to a 15% increase, and affecting 11,130 firms in the region. Across the UK as a whole, the data showed that ‘significant’ distress had grown by 14% since Q3 2019, with 557,000 businesses now in financial difficulties.

With the courts closed during lockdown, the increase could be much higher given the lack of legal action on insolvent and distressed businesses.

Despite the Government’s summer Eat Out to Help Out campaign, which saw more than 100 million subsidised meals sold during August, bars and restaurants remained one of the worst hit sectors. In the North East, the number of bars and restaurants seeing ‘significant’ financial distressed leapt by 17% year on year with a 4% rise since Q2 and almost 550 hospitality businesses in trouble.

The popularity of ‘staycation’ holidays has also apparently failed to stem a tide of distress in the travel and tourism sector where businesses in ‘significant’ financial difficulty in the North East rose by 22% since Q3 2019; and hotels and accommodation saw a 26% uplift year on year.

The region’s real estate and property services firms also continued to struggle, with a 28% increase in early distress in Q3 compared with the same period the previous year, and 1,200 businesses in that sector affected in the North East.

Gillian Sayburn, partner for Begbies Traynor in the North East, said: “Last week’s promise by Rishi Sunak of greater financial support for businesses that are reeling from the effects of being placed in the higher tier categories, as much of the North East has been, is welcome news.

“However there are real fears that for many businesses, particularly in the region’s hospitality industry, the funding may have come too late to save those that have suffered from the chronic lack of revenue brought about by the blanket 10pm curfew and Tier 2 ban on households mixing indoors.

“Seeking professional advice is always the best course of action for any businesses that are struggling: there may be strategies that, if put in place now, could help to future-proof an organisation even in the face of the multi-faceted uncertainties of the Covid pandemic. This, together with the increasingly likely possibility that the UK will leave the EU without a trade deal, places businesses here and across the UK in a precarious situation.”

This was posted in Bdaily's Members' News section by Emma Kilmurray .