North East firms face insolvency risk rise as Christmas looms

Firms across the North East are facing up to increased insolvency risks in most sectors, according to the latest figures from insolvency and restructuring trade body R3.

Their data, compiled using Bureau Van Dijk's Fame database, show that business stability rankings have fallen in ten of 11 main industry sectors.

This means a growing proportion of firms are deemed to be at above average risk of insolvency, with only the region's agricultural sector bucking the trend.

Rising business rates, increases to the national living wage and other higher operational costs have all played a part.

During the past six months, every sector in the North East has seen an increase in the proportion of firms deemed to be at above average risk of insolvency.

The number of professional services firms in such a position increased by 6.6% between May and September, while the proportion of IT firms at risk jumped from 33.1% to 38.7% in the same period.

In further bad news for the North East region, six of the 11 sector indicators display lower levels of business stability than the national average in those industries – including the retail, technology, construction, manufacturing and professional services sectors.

Despite the rising levels of insolvency risk, firms in the region reported in November that they remain optimistic regarding their fortunes in 2018.

The hospitality sector in the region remains strong, while the pubs and restaurants sector is second nationally for its levels of business stability - however the closure rate in the latter is high.

Some 31.1% of firms are now deemed to have a heightened risk of going into insolvency in the next 12 months, a jump of 5% on six months ago.

Looking to the wider UK picture, that level of insolvency risk is broadly in line with the nationwide average of 31%.

R3's North East chair Neil Harrold explained that firms have struggled to cope with a greater number of financial challenges, with Insolvency Service data showing a 15% year-on-year jump in levels of corporate insolvency.

'These latest regional figures probably aren't too surprising, but that doesn't make them any less concerning' he said.

For those facing up to financial difficulties, it’s important to seek advice and assistance at the earliest opportunity in order to increase the number of insolvency, recovery or restructuring methods that might be available.

By Phil Smith


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