More than 12,500 firms across the North East are now in financial difficulty, latest research reveals, with business trade bodies warning the figure is just the tip of the iceberg.
Business distress has soared by 31% across the region since the end of 2019, with more than 3,000 more businesses now reporting financial trouble, according to the latest Red Flag Alert report by business rescue and recovery specialist Begbies Traynor.
Distress levels also jumped by 14% in the last three months of the year, as a further 1,500 companies in the North East plunged into distress.
The Red Flag Alert research, for Q4 2020, also recorded ‘significant’ distress affecting 630,000 businesses across the 海角视频, a 27% year-on-year increase nationally, with London seeing a 33% jump compared to the end of 2019.
Begbies Traynor also found that, in the North East, almost all of the 22 sectors monitored by Red Flag Alert displayed a double-digit increase in ‘significant’ distress year-on-year, ranging from an 8% to a 54% rise, with the worst hit sectors including travel and tourism (up 54% year on year), hotel and accommodation (up 51% year on year) and real estate and property (up 47% year on year).
The company also warned that the figures likely represent the tip of the iceberg because the Covid-19 pandemic has reduced court activity, limiting the number of CCJs and winding up petitions being issued against firms.
Gillian Sayburn, partner for Begbies Traynor in the North East, said: “The pandemic meant that 2020 was a devastating year for thousands of businesses as they fell further into financial distress and Q1 2021 seems to be offering little hope of an upturn.
“The Government’s extended furlough and financial support measures will provide some relief and should save a significant number of businesses from entering into insolvency in the short term. However, because not every business will be sustainable, the reality, even post-pandemic, is that the Government will have to be ruthless when handing out its rescue funds.
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“Unfortunately, for many struggling companies, Government financial help will provide little more than a stay of execution as debt levels become unmanageable and structural changes across many sectors take their toll.”
The figures come as insolvency and restructuring trade body R3 issued figures showing the first month-on-month rise in the number of corporate insolvencies for almost a year .
The number of corporate insolvencies increased by 37.8% from 891 in November to 1,228 last month, and was 9.2% higher than for December 2019’s figure of 1,125.
Alexandra Withers, North East chair of the insolvency and restructuring trade body R3, said corporate insolvency numbers are expected to keep rising this year, prompting her to advise business owners to seek qualified advice as early as they can.
She said: “This is the first time since February 2020 that the monthly corporate insolvency figures are higher than in the same month the previous year, which suggests that that the economic impact of the pandemic may now finally be pushing increasing numbers of struggling businesses over the line into formal insolvency.
“While it’s too early to judge the impact of the latest lockdown on North East businesses, it has further complicated an already muddy economic picture, and will likely have been an additional blow for regional firms which lost the busy festive period on which they traditionally depend.
“It’s plainly a question of when, not if, insolvency numbers will further increase this year, especially as the Government’s support packages, which have provided a critical safety net for businesses and individuals, are due to start running out at the end of the first quarter.
“Even if the Chancellor decides to extend them again, as he’s had to do previously, they will have to come to an end at some point.”