North East firms report fall in financial distress

Latest Begbies Traynor report showed region ahead of the UK average for improvements

Andy Haslam, partner of Begbies Traynor in the North East
Andy Haslam, partner of Begbies Traynor in the North East

Corporate recovery in the North East remained steady in the final quarter of 2013, with a 15% year-on-year fall in ‘critical’ financial distress, new research suggests.

The latest Begbies Traynor Red Flag Alert report, which monitors the financial health of businesses, shows improvements in region well ahead of the average for the UK, where there was an overall decrease of 4% in the number of businesses struggling to this degree.

However, levels of critical distress in the North East rose 21% quarter-on-quarter at the end of the year in contrast with UK-wide figures, which showed a fall of 1% over this period.

The Red Flag reports highlights firms as being in critical distress when County Court judgments amount to more than £5,000 within a three month period, when winding-up petitions have been issued or when businesses have entered Corporate Voluntary Arrangements.

Across the UK, 224,579 companies, meanwhile, showed ‘significant’ financial problems during the final quarter, of which 5,254 are based in the North East. Among those hardest hit in the region were bars, restaurants and hotels. Food and beverage manufacturing, construction, and professional services also experienced growing financial distress.

Andy Haslam, partner of Begbies Traynor in the North East, said: “It is encouraging to see some signs that business confidence is increasing and that the recovery is making slow, but steady progress both here and across the UK.

“However, the 21 per cent increase in instances of critical distress quarter on quarter may indicate that while the regional economy has undergone a dramatic improvement over the last 12 months, there could be another spike in insolvencies ahead of us. With earlier stage ‘significant’ distress continuing to increase in some sectors in the region this quarter, we are seeing growing fragility particularly among the small businesses community.”

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