More than 1,700 Stoke-on-Trent businesses found themselves in 'significant' financial distress during the final quarter of 2021, according to a new report.
The latest figures from Begbies Traynor's 'Red Flag Alert' – which monitors the financial health of British companies – found that the city saw a four per cent increase in the number of businesses struggling between October and December 2021 to 1,723.
In Stoke-on-Trent, real estate and property and manufacturing experienced the biggest quarterly increases, seeing five and six per cent rises respectively between the third and fourth quarters of last year.
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The increase is in line with the national picture highlighted in the research which found there were 589,168 businesses in 'significant distress' for the final quarter of 2021, which is a five per cent increase on the previous quarter.
There are also concerns about a steep increase in County Court Judgements (CCJs), which are often a key early sign for future insolvency, as official data shows a 106 per cent rise.
Michaela Daly, director at Begbies Traynor in Stoke-on-Trent, said: "Businesses in Stoke-on-Trent that have bravely battled through the pandemic could now finally start to fail as the pressures they face become too much.
"Support from the Government such as furlough payments, tax reliefs and a moratorium on landlords being able to evict businesses due to rent arrears cannot go on forever.
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"Without those in place to protect them, a rising number of companies in the region will have no other option but to throw in the towel after two years of struggling on in the economic uncertainty caused by measures to combat coronavirus.
"The lag effect of the economic fallout from covid, plus spiralling inflation, has created a perfect economic storm for many companies, particularly the region’s small and medium enterprise (SME) sector, which will undoubtedly drive insolvency rates even higher."
According to Begbies Traynor, inflation is now the 'silent thief' in the economy with the true rate potentially running far beyond the official 5.4 per cent rate and possibly more than seven times the Bank of England’s target of two per cent.
Today, rising wage, energy and materials costs mean the consumer price index (CPI) figures are showing only part of the story and the subsequent impact on the public’s disposable income is expected to be far greater.
However, although official Government support measures are unwinding, there are indications that the authorities are willing to help businesses which are trying to fight on.
Michaela added: "Anecdotally, we are hearing stories about HMRC giving companies two or even three years to pay their tax bills.
"Extra leniency may not be an official policy, but it sends a signal that officials are trying to help businesses survive – even though it might only be delaying the inevitable.
"Any businesses facing financial difficulties, for whatever reason, should seek professional advice in order to fully understand the options available."