Monday, November 29, 2021
Finance

39,000 South West firms in significant financial distress

financial distress

Sectors under the most stress nationally include support services, construction and property

Over 39,000 South West companies are in significant financial distress and the situation is expected to worsen, a new report says.

Companies in the region are facing issues such as supply restraints, inflation, rising energy prices, staff shortages, and the end of Government Covid safetynets, according to the latest report from corporate recovery and insolvency expert Begbies Traynor.

The Red Flag Alert Report, for Q3 2021, shows that nationally 562,000 businesses are in difficulty with a huge rise in court action fuelling insolvency worries.

This is 15 per cent higher than two years earlier, before the pandemic struck, but down 14 per cent on the previous three months in 2021.

In the South West 39,870 companies are in significant financial trouble. Of those, 1,248 are in Plymouth, although this figure has dropped 7 per cent on Q3 in 2020, and 15 per cent on Q2 2021, as the majority of Covid restrictions were eased and the economy reopened.

Support services, construction, real estate and property were the sectors under the most stress nationally.

In Plymouth, real estate and property tops the list for July to September, followed by bars and restaurants. Both showed 7 per cent annual increases, but it also represents a 12 per cent and 3 per cent decrease between Q2 and Q3 2021.

That said, Begbies Traynor is warning there are considerable challenges ahead for businesses, including constrained raw material availability, rising inflation, labour shortages, spiralling energy prices and the winding back of Government Covid support measures, which could yet impact failure rates during the rest of 2021 and beyond.

Scott Kippax, partner at Begbies Traynor in Plymouth, said: The quarterly fall in significant financial distress is welcome news and provides some breathing space for hard hit Plymouth businesses.

However, concerns remain that trading conditions will deteriorate for many companies, with rising CCJ (county court judgements) figures an early indicator that some suppliers are running out of patience with customers stretching payment terms, he said.

Despite the summer economic boom, systematic problems remain, and many businesses face a long-term struggle with repaying Government-backed Covid loans, he said.

He said: However, inflation, energy costs and labour availability may prove to be the snake in the grass for many of these businesses, particularly if they are unable to pass these costs on to their customers.

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