Northern firms continue to face insolvency pressures
The proportion of northern retailers deemed at risk of insolvency climbed again in September, according to research from insolvency and restructuring trade body R3.
It marks the sixth consecutive month where risk levels have increased, while Quarter Day when commercial rental payments are due could leave more firms facing difficulty.
Some 27% of firms in the north are now at above average risk of insolvency, compared with 24% six months ago.
At the same time, the quarterly rent payment date is typically around the 25th of March, June, September and December, meaning some retailers will face a considerable outgoing this month.
R3 points to the fact that several big name high street retailers have entered into administration just before or in the aftermath of Quarter Day during the last decade.
This has raised fears that retailers in the north east could face difficulties as they struggle to meet their rental requirements while also facilitating enough stock ahead of the year’s busiest trading period.
Nine of 11 sectors reviewed by R3 have seen insolvency risk levels increase during the last six months by between two and four percentage points.
Compiled using Bureau Van Dijk’s Fame database, R3’s risk tracker focuses on key business information to measure a firm’s likelihood of survival for the coming 12 months.
While the restaurant sector has been steady for most of the year, the transport and haulage sector has also shown improvements.
However, seven of the 11 industries in the north east have a greater risk of insolvency than the national average for their sectors, while 29% of firms in the region having a poor level of business stability.
Although that figure is broadly in line with the national average, it represents a 4% jump from March this year.
Fortunately for many retailers, the run-up to Christmas may see the situation change, although those facing difficulties should consider contingency planning to cover for all eventualities.
The threat of insolvency may also provide an opportunity for a business to restructure their operations in order to provide a better long-term outlook.
By Phil Smith