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Insolvency Risk In North East Professional Services Sector Hits Lowest Level For A Year

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The proportion of North East professional services sector firms with a raised risk of insolvency has fallen to its lowest level in a year, according to insolvency and restructuring trade body R3’s latest research.

The proportion of regional accountancy, legal and other such firms with a higher than normal risk of entering insolvency in the next 12 months went past 50% in May 2018 and has remained above that figure ever since.

But R3’s latest figures show that, while the number of active professional services firms in the region has risen from 1,152 last May to 1,200 today, the proportion facing a raised risk of insolvency is now 49.9%.

The sector now has the fifth lowest proportion of companies at higher than usual risk of insolvency out of any region of the UK, although its rate remains slightly above the national average of 49.3%.

The latest R3 research shows that North East businesses in six of the 11 sectors it monitors are performing better than the national averages for their respective industries.

The North East’s pub and restaurant sectors continue to have the lowest proportion of companies at higher than normal insolvency risk of any region in the UK.

The agriculture and hotel sectors maintain second and third places in their respective lists, while the transport/haulage and technology sectors are each in fourth place in theirs.

The overall proportion of all North East companies with an elevated insolvency risk (41.7%) remains unchanged from last month and is still lower than the 42.7% figure for the UK as a whole.

R3’s insolvency risk tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.

Andrew Haslam, chair of R3 in the North East and head of specialist business advisory firm FRP Advisory LLP’s Newcastle office, says: “This is clearly not a dramatic improvement in the professional services’ sector’s fortunes, but after a particular challenging period, it’s symbolically positive to see the proportion at elevated risk drop below the 50% mark.

“Professional services firms’ success is naturally tied to their clients’ performance, and with the general insolvency rate climbing steadily over the last couple of years, it’s perhaps not too surprising that this sector has experienced more pronounced problems.

“The regional pub, restaurant, and hotel sectors’ performance remains robust and provides a solid platform to allow these businesses to maximise returns over the peak summer months, while across the regional economy as a whole, rates of raised insolvency risk are staying fairly steady despite continuing political and economic uncertainty.

“Financial and operational issues can arise at any time for any type and size of business, and owner/managers need to maintain a firm grip of their finances to ensure they can take immediate steps to address any problems as soon as they become apparent.”