Half of Welsh tech firms face rising insolvency risk
Nearly one in two Welsh technology companies face an above average risk of insolvency, according to new figures from insolvency and restructuring trade body R3.
Some 49.4% of IT firms were in the negative band of the ranking in June, equating to around 2,300 companies.
It represents a significant increase from 12 months previously when 33.6% of IT firms in the region were in a similar position.
The Welsh transport and haulage and construction sectors also have high levels of insolvency risk, although they are both performing marginally better than the UK average for the industries.
Both sectors are extremely volatile, with 40.6% of transport firms and 42.1% of construction firms falling into R3’s higher risk band.
Of 103,000 businesses registered in Wales, more than 42,000 were deemed to be at above average risk of insolvency for the next 12 months.
The figures are reflective of the UK as a whole, where 40.9% of firms are facing a greater than usual threat of insolvency.
Louise Durkan, chair of R3 in Wales, has said the latest figures are no cause for alarm, especially when considering that insolvency risk levels among tech firms are among the highest across the UK.
Only professional services firms have a higher insolvency risk level in Britain, while the tech sector is also renowned for having a high number of start-ups which are prone to higher risk.
All of the figures come from Bureau Van Dijk’s Fame database, which is used to develop the insolvency risk tracker.
Risk is calculated by analysing balance sheets, other financial information and by taking into account the track record of directors, in order to work out the likelihood of survival for the next year.
Tech firms also require widespread skill sets, financial backing and good strategy in order to be successful, and a lack of these aspects can bring further risks.
Any firm facing financial issues or even a greater threat of insolvency is encouraged to seek guidance at the earliest opportunity so that potential solutions can be discussed.
Alternatively, a business looking to decrease the risk may want to undertake an independent business review – an unbiased look at assets and finances that can help to develop a long term strategy.
By Phil Smith