North East insolvency risk surges in first half of 2018

The proportion of North Eastern businesses deemed to be facing an above average risk of insolvency has surged by 15% in the first half of 2018.

Although the number of active firms in the region has also increased by 2%, difficult trading conditions have had an effect according to insolvency and restructuring trade body R3.

Some 40% of companies in the North East are now perceived to be facing a higher than above average risk of insolvency for the next 12 months, up from 34% at the start of the year.

While the region performs slightly better than the national average risk level of 41%, a significant number of businesses are still under threat.

Eight of 11 key sectors have showed a degree of stability, with the restaurant sector performing particularly strongly.

The construction, transport and haulage, and technology sectors are also stable when compared to the rest of the UK.

However, 51% of professional services firms face a threat of insolvency, 3% higher than the national average.

The North East had the highest proportion of firms facing a heightened risk of insolvency less than 12 months ago, while it now ranks fifth of 12 regions in the UK.

Despite this, insolvency remains a threat for a significant number of firms, especially those in the retail sector where risk levels are only higher in the South West.

R3 North East chair Andrew Haslam said the fact there are more firms in the region is encouraging, but that rising insolvency risk levels are a cause for concern.

He added that the net increases in the number of firms hide the fact that many have already failed in the past six months.

The key for business owners is to act quickly at the first signs of difficulty, as it ultimately means more potential refinancing or restructuring solutions may be available.

An independent business review may also highlight areas of concern, allowing decision makers to find a suitable strategy to put things right.

By Phil Smith


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