Jump in businesses in financial distress in the north west

In total, those described as in “significant” financial distress went up to 45,579 in the quarter – a 3.47% jump on the 44,052 seen in the first quarter of 2023. By sector, those involved in construction, real estate and support services made up 41% – or 18,838 – of those in significant distress.  

Additionally, the number of firms in the bars and restaurants sectors in distress increased by more than 10%, and there are now 1,305 local companies – many family-owned – struggling to survive.  

Begbies Traynor’s Red Flag data also found that discretionary spend sectors have been hit hard over the past 12 months, with sports and health clubs has seen a 22% year-on-year increase in significant distress, while the food and beverage sector saw a 19.84% jump and those in leisure and culture went up by 11.14%.  

Begbies Traynor partner Gary Lee said: “Rising interests rates coupled with a stubborn inflationary environment are the core drivers behind the increase in the number of companies in the north west operating on the brink. 

“We regularly see company directors who have a business loaded with debt that looks more vulnerable every single month as the Bank of England increases rates. The era of ‘cheap money’ is over and smart company directors are already restructuring or refinancing their operations to survive. 

“Construction and property are major bellwethers for the health of our regional economy and the sheer volume of firms in distress will have creditors in their supply chains looking nervously at their own financial exposure. 

“The fact that property is intrinsically linked to interest rate fluctuations and debt funding means these companies have been cruelly hammered by rising rates and the inflation that has been building up over the past 18 months. 

“Almost all consumers are cutting back on discretionary spend so it’s no surprise to see some of our favourite restaurants, bars, sporting and cultural activities taking a hit.

“These types of companies will only see conditions worsen as more people face paying more each month for their mortgage. They’ll have to offer something really special to entice people to spend as we head into the second half of 2023 or they face extinction.”