Midlands insolvency risk bucks national trend
National rates of corporate insolvencies may be declining according to government figures, but risk levels in the Midlands buck the trend.
Insolvency and restructuring body R3 has claimed that more than a quarter of firms in the region are at an above average risk of becoming insolvent.
This comes despite a 15.4% drop in corporate insolvencies nationally during the second quarter and means more businesses are currently under threat than at any point this year.
Both the East and West Midlands displayed above average risk levels, with 28% and 27% of firms respectively deemed to be at a higher than normal risk of insolvency.
R3 Midlands chairman Chris Radford added that corporate insolvency practitioners in the region have been reporting “tougher times” for businesses throughout this year.
In the East Midlands, the only sectors to report a decline in insolvencies were technology and IT, but yet high risk levels remain – four in ten firms face above average risk of insolvency.
Meanwhile in the West Midlands, the hotel sector noted a dip in insolvency rates but risk levels increased massively for transport and haulage firms.
Increased insolvency risk is tied to a number of operational cost increases, according to R3, who list higher import prices, the introduction of the national living wage and rising business rates as key factors influencing business’ financial security.
Mr Radford adds that’s significant economic growth will likely be needed to balance out the other factors, which is why insolvency risk levels remain high.
Using figures from Bureau Van Dijk’s Fame database, R3’s figures for August suggest that around 57,400 firms in the East Midlands are deemed to be at above average risk – nearly 10,000 more than recorded in January.
R3 highlights the need for businesses to keep a watchful eye on their finances in the current economic climate, and a business should not delay seeking advice if it deems itself to be facing difficulty.
Restructuring opportunities do exist for firms facing tough times and options reviews can help to identify the best way of dealing with an issue.
By Phil Smith