Business distress has risen by almost 71% in the North East since the EU referendum three years ago, according to the latest research from Begbies Traynor, the UK’s leading independent insolvency firm.
Published today (17 October 2019,) the latest quarterly Red Flag Alert data, which monitors the financial health of UK companies, shows that a total of 9,665 firms in the North East were showing signs of ‘significant’ distress by the end of September 2019, compared with 5,661 distressed businesses in June 2016.
‘Significant’ distress (which refers to companies with relatively minor financial problems such as having CCJs of less than £5,000 filed against them, or showing a marked deterioration in key financial ratios and indicators) is often viewed as a warning of more serious financial problems to follow.
Across the UK as a whole, this type of financial distress has risen by 40% over the last three years, affecting 489,000 businesses.
With the lowest September consumer spending figures on record and the housing market remaining subdued, customer-facing sectors have been particularly badly affected as confusion and uncertainty over Brexit continues.
The real estate and property services sector, in both the North East and the UK as a whole, has been especially hard hit with a 10% rise in the number of property businesses in the region suffering ‘significant’ distress year on year.
By September 2019, a total of 945 property firms in the North East were experiencing these early signs of financial difficulties.
Consumers’ reluctance to spend has also affected bars and restaurants across the North East: a total of 463 businesses in the sector were in ‘significant’ financial trouble in Q3 2019, 11% more than the same period in 2018, but a fall of 1% compared with Q2 2019.
According to the Begbies Traynor research, construction remains one of the most severely distressed sector across the UK. By Q3 2019, 1,479 of construction firms in the North East were in ‘significant’ financial distress, a 2% increase on the previous year.
In contrast, travel and tourism was the North East sector which saw the most marked fall in distress levels, with an 11% drop in distress quarter on quarter and a 6% fall year on year.
Gillian Sayburn, partner at Begbies Traynor’s Newcastle upon Tyne office, said: “Following the ongoing uncertainty and weak consumer spending in the wake of the EU referendum over three years ago, we are seeing a cumulatively devastating impact right across the British economy.
“Economic turbulence and lack of spending has led to increasing frustration among businesses as they are simply unable to plan for the future, and this is leading to stagnation within the whole economy. Small companies are particularly vulnerable to these kinds of setbacks, putting them at elevated risk. It is vital that any business owner whose firm is showing signs of financial problems seeks professional advice as soon as possible in order to avert disaster.”