Member Article

North East Start-Up Numbers Increase Over Summer - But Insolvency Events Rising More Quickly

A month-on-month spike of more than five per cent in the number of new businesses being set up in the North East during the summer has been balanced out by the number of regional insolvency events over the same period growing by 22 per cent.

According to analysis by insolvency and restructuring trade body R3 of new data provided by CreditSafe, 1,461 new businesses were established in the North East during August, increasing from 1,386 in July and 1,358 in June.

But at the same time, R3’s research also found that there were 95 insolvency-related activities, which includes liquidator appointments, administrator appointments and creditors’ meetings, across the North East during August, compared to 78 in the preceding month.

The 686 insolvency-related activities across the region during the first two-thirds of 2023 compared to just 569 in the same period last year, an increase of over 20 per cent, while the August figure is more than 50 per cent higher than the 61 recorded in the same month last year.

Over 12,300 North East businesses had more than 152,000 overdue invoices on their books during August that should already have been settled, with both figures being broadly comparable with the numbers for the preceding month.

Chris Ferguson, North East chair of R3, who is director of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, says: “While it’s always encouraging to see start-up numbers growing in the region, concerningly the corporate insolvency numbers are well above pre-pandemic levels.

“The economic issues that we’re all experiencing clearly continue to bite and these latest figures are stark evidence that trading conditions for most business will continue to be challenging for the foreseeable future.

“Costs are rising at a time when people are cutting their spending back, leaving businesses facing the challenge of shrinking revenues and tightening margins. Businesses now face the tough decision whether to absorb these cost increases or pass them onto customers, which can be a difficult balance to get right.

“Sat alongside this, demands for wage increases and higher energy bills continue to hit businesses hard.

“Late payment problems remain stubbornly present for many North East firms, and with delayed payments often being a significant factor in many business failures, they can have a far wider impact than just on a distressed business itself.

“The end of summer can traditionally be a quiet time for many companies, so if company directors feel they’re not entering autumn period in their best shape, we’d urge them to look for qualified advice as soon as possible, so they can maximise the options available to put things right.”

This was posted in Bdaily's Members' News section by Julian Christopher .