The latest data reveals a troubling increase in financial distress for North East businesses. Key figures from Begbies Traynor highlight the significant rise in early financial distress in the region.
- Early signs of financial distress rose by over 40% in Q2 2024 compared to the same quarter the previous year.
- The North East saw a 10.4% quarter-on-quarter rise in businesses showing early financial distress.
- Hotels, industrial transport, media, travel, and automotive sectors experienced the largest increases in distress.
- Some sectors like food and beverages witnessed a decline in financial distress.
The North East continues to face economic challenges with the latest Red Flag Alert data from Begbies Traynor showing alarming increases in financial distress among businesses. Early signs of financial trouble grew by more than 40% in Q2 2024 compared to the same period last year. This means another 11,329 businesses are now experiencing significant distress, a situation characterised by deteriorating financial ratios and indicators.
Despite the rise in early distress, the region’s situation mirrors the national trend, which saw a 36.9% increase in early financial difficulty across the UK. However, the North East’s growth rate outpaced the national average, indicating a more severe economic strain in the area. In more advanced or critical distress, the region saw a 41.3% increase year-on-year, though there was a slight decline of 4.3% since Q1 2024, affecting 743 businesses. Nationally, critical distress rose by 34.5% year-on-year, affecting over 40,600 businesses.
Eleven out of twenty-two sectors in the North East saw double-digit increases in significant distress in Q2 compared to the previous quarter. The hardest-hit sectors include hotels and accommodation (39.4% increase), industrial transport (27.4%), media (23.1%), travel and tourism, and automotive (both around 20% rise). Meanwhile, some sectors like food and beverages saw a decline in early distress, down by 23.2%. Other sectors with decreases include utilities, print and packaging, wholesale, and food and drug retailers.
Andrew Little, a partner at Begbies Traynor in the North East, commented on the ongoing issues. He noted, “After a few really challenging years, many businesses are still reeling from the combined impact of Brexit, Covid and then the cost of living crisis, and a number are now reaching the end of the line.” He added that while there are cautious causes for optimism, any economic recovery may take too long for some SMEs.
Partner Gillian Sayburn echoed these concerns, stating, “While the region largely appears to be holding its own and reflecting the national picture, it is still worrying to see over 11,000 businesses here experiencing early signs of financial distress in the second quarter of the year. As ever, we urge owner managers to proceed with caution, keep a sharp eye on cash flow and seek professional advice at the first signs of financial problems before the situation escalates.”
The rise in financial distress in the North East highlights the urgent need for businesses to remain vigilant and seek early intervention to navigate ongoing economic challenges.