Dudley and Staffordshire have seen sharp increases in the number of businesses in significant distress, the latest Red Flag Alert data from Begbies Traynor has revealed.

The advisory firm says rising interest rates, debt, subdued consumer confidence, high energy costs, and wider economic uncertainty are putting "considerable financial pressure" on West Midlands businesses. Some 9,693 were deemed to be at risk of economic failure across the region in Q3 - a quarterly increase of 4.4%.

Dudley saw a rise of 18.1% in the number of businesses in distress, followed by Stafford which saw a 17% rise. There were smaller rises in Walsall (6.8%), Wolverhampton (5%) and Birmingham (3.2%).

The construction sector was hard hit, with the number of struggling construction firms rising in Stafford (38.18%), Walsall (23.58%), Wolverhampton (18.13%), and Dudley (11.36%). Birmingham saw a 20% quarterly increase in the number of professional services companies in significant distress.

In the º£½ÇÊÓƵ as a whole, almost 480,000 businesses reported significant financial distress during the third quarter of 2023, with almost 40,000 classed as being in ‘critical financial distress’.

Mark Malone, partner at Begbies Traynor in the West Midlands, said: "This latest data highlights how the debt storm, which has been building for years, but had been held off by several measures to provide breathing space for companies, is likely to break. Many businesses that had geared up on debt at historically low rates, and were only able to survive during the pandemic thanks to Government support, must now deal with a financial reality check as higher interest rates hit working capital for the foreseeable future.

Area

Total companies in significant distress

% change YoY

% change Q o Q

Dudley

471

18.9%

18.1%

Walsall

900

1.2%

6.8%

Birmingham

6,540

-7.0%

3.2%

Wolverhampton

1,334

9.7%

5.0%

Stafford

448

7.43%

17.0%

"Taken together with stubbornly high inflation and weak consumer confidence, many of these businesses will inevitably head towards failure. While stabilising inflation and interest rates could start to slow the rising levels of distress in the economy, history dictates that this will take some time and insolvencies often peak long after a recovery has started. Unfortunately for many businesses, time is not on their side."