Home Finance & Investments Businesses in the North East bounce back as society reopens – amid...

Businesses in the North East bounce back as society reopens – amid concerns recovery may be short lived

Gillian Sayburn and Andrew Little, partners for Begbies Traynor in the North East

Business distress in the North East and across the UK saw a sharp fall in the third quarter of 2021 compared to the previous quarter as the economy showed signs of recovery following the relaxation of Covid regulations this summer.

The latest Red Flag Alert data, published today (29th October 2021) by leading independent business rescue and recovery specialist Begbies Traynor, revealed that for the three months to September 2021, there was a 15% decline in the number of ‘significantly’ distressed businesses in the region compared to the second quarter of 2021. However, the figures also showed that there had only been a minimal fall of just 1% in the number of companies in ‘significant’ or early-stage distress compared with the same period the previous year- before the second national lockdown was imposed in November.

The new data shows that a total of almost 11,000 firms in the North East were displaying symptoms of ‘significant’ financial distress in the third quarter of 2021.’ Significant’ distress refers to companies that have financial problems such as having minor county court judgements of less than £5,000 filed against them.

Looking across the UK as a whole, there was a 14% fall in ‘significant’ distress compared to the previous quarter, and a 1% increase year on year.

Begbies Traynor’s figures also revealed a rise in the number of firms displaying the more advanced symptoms of ‘critical’ distress which includes having CCJs of over £5,000 filed against them. In the North East, ‘critical’ distress was down by 3% on the previous quarter and up by 11% year on year.

In the North East, the sectors which saw the sharpest decline in ‘significant’ distress quarter on quarter were financial services (down by 28%); printing and packaging (-23%); industrial transportation and logistics (-21%); and construction (-18%). In contrast, some sectors are continuing to struggle, with travel and tourism seeing a decrease in ‘significant’ distress of just 4% since Q2 of this year; hotels and accommodation down by 8% ; and leisure and cultural activities by 9%.

Gillian Sayburn, partner for Begbies Traynor in the North East, said: “There is some cause for optimism in the latest figures for the region with falling levels of early distress since the previous quarter reflecting the national picture as the economy benefits from the easing of Covid restrictions.

“However, there’s no doubt that the impact of the pandemic and Brexit means that businesses are now facing a myriad of new challenges. Not only are shortages in raw materials and labour pushing up costs with consumers likely to bear the brunt of rising prices, in addition, we are seeing supply chain issues, including severe driver shortages and escalating fuel costs. All these pressures are being heaped on businesses at a time when government support measures are being withdrawn and many are also having to start paying back loans.”

Fellow partner Andrew Little commented: “While we all hopeful that after two years of disruption, a post-pandemic economic recovery is round the corner, the worry is that the perfect storm now facing beleaguered small businesses will prove to be the final straw. Any small businesses that are struggling should seek professional help as soon as possible before their situation escalates.”