East of England businesses face debt risks
Businesses in the East of England are treading a tight rope with their finances, according to the latest figures from insolvency and restructuring trade body R3.
Their data reveals that 7% of businesses in the region would struggle to repay debts if interest rates were to rise by even 1%.
It equates to 21,000 firms who are deemed to be at serious risk of insolvency, while the number of zombie firms – those only able to trade due to low borrowing costs – has also surged.
This marks a significant rise from the number of firms that were deemed to be in that situation in September 2016, when zombie firms accounted for less than 1% of those in the East of England.
R3 and BDRC Continental have carried out the survey into business distress for some time, and use the figures to map the state of businesses all over the UK.
Of concern to R3 Eastern Chairman Mark Upton, is the fact that 18% of firms in the East of England are only paying interest on their debts – up from 13% last September.
He adds that with “tens of thousands of firms walking a very tight line”, rising inflation could lead to a “double whammy for struggling businesses” should interest rates also rise.
It is a similar situation for firms in the north of England, where the latest figures suggest around 29,000 firms could be facing an increased risk of insolvency.
Those facing difficulties are encouraged to consider options reviews to detail how best to move forwards.
This should reveal if simple management or complex debt restructuring processes are required, while businesses can also seek advice that is appropriate for their situation.
Innovative thinking can help a business to overcome its issues, which is why turnaround management services can help to alleviate some of the stress and pressure placed on existing management teams.
By Phil Smith