- 4% increase in financial distress in Lancashire compared to previous quarter
- 10,307 firms in Lancashire now operating under significant financial distress
- 6% year-on-year increase in distress
- Inflation, labour costs and mounting debt cited as key reasons amongst market turmoil
New research from restructuring experts Begbies Traynor has revealed a 4% quarterly increase in the number of Lancashire-based businesses experiencing ‘significant financial distress’.
More than 10,000 businesses in the region (10,307) were operating under significant financial distress in Q3 of 2022 according to the latest Red Flag Alert data produced by Begbies Traynor.
It’s the first time this figure has topped 10,000 in more than a year and comes amid dire warnings about the health of the UK economy.
The research, produced each quarter by Begbies Traynor in Preston, monitors the levels of financial distress experienced by companies across Lancashire.
19 of the 22 sectors analysed in the region saw an increase in levels of significant financial distress on the quarter except for Hotels & Accommodation, Media and Wholesale.
In terms of sheer volume, the three sectors hardest hit by financial distress in Q3 of 2022 were Support Services (1,353 firms) which has seen a 3% quarterly increase, Construction (1,479) which has also seen a 3% rise and Real Estate & Property (1,384) which saw a 6% rise.
Nationally, more than 600,000 firms are in significant financial distress (607,522), an 8% increase from the same period last year (562,550).
Chris Lawton, Insolvency Director at Begbies Traynor in Preston, said:
“We are having conversations with business owners across Lancashire every single day and it’s clear that inflation, labour shortages and paying back debts are the core challenges company directors face and the main reasons for this increase in distress over the period.
“A policy of companies holding onto cash as the global economy cools down and currency values continue to fluctuate creates more pressure from nervous unsecured creditors. These creditors are increasingly wary of their own financial position and are being noticeably more assertive in pursuing money owed for goods and services.
“The repayment of Government-backed loans are becoming more of a problem for SMEs who used these loans to survive lockdown but now find themselves struggling to repay them alongside existing credit arrangements. HMRC is also talking an increasingly assertive approach to the recovery of overdue VAT, PAYE and corporation tax, especially where companies are not meeting their obligations under deferred payment schemes.
“The pressure is on for thousands of businesses across Lancashire and the acceleration of insolvency rates we have seen in recent weeks looks likely to continue. Company directors who find their business in financial distress should take swift action before their options run out.”
