Latest quarterly update from insolvency specialist Begbies Traynor reveals almost 10,000 Liverpool city region firms are fighting for survival. Tony McDonough reports

Almost 10,000 Liverpool city region firms are “in the danger zone” according to new data from insolvency specialist Begbies Traynor.

Its latest quarterly Red Flag update reveals almost 10,000 firms across Merseyside are classed as being in “significant financial distress”. The figure covers the third quarter of 2022 and is 5% higher than the second quarter.

Experts at Begbies Traynor say that companies continue to be hit hard by inflation, mounting debt and labour costs. The new data also found that 59 firms were in ‘critical distress’ in the third quarter of 2022, a year-on-year increase of 74% (up from 34).

The Red Flag Alert Data has analysed the health of companies across the region for the past 15 years. Today, the data confirms that 458 more firms entered ‘significant distress’ between Q2 and Q3 of 2022 and 9,351 are now in danger.

It reveals support services (1,418), construction (1,336) and property (1,443) sectors have the highest volumes of firms in significant distress of the 22 analysed. Increases in distress rates were seen across 21 of the 22 sectors, with food and drug retailers being the exception.

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Jason Greenhalgh, partner at Begbies Traynor, said: “The repayment of bounce back loans is becoming more of a problem for SMEs. Many used these loans to survive lockdown but now find themselves struggling to repay them alongside existing credit arrangements and rising costs.

“HMRC is also taking an increasingly assertive approach to the recovery of overdue VAT, PAYE and corporation tax, especially where companies are not meeting their obligations under deferred payment schemes.

“The pressure is on for thousands of businesses across Liverpool. The acceleration of insolvency rates we have seen in recent weeks looks likely to continue to the end of the year and into 2023.”

A company classed as being in significant distress is one with minor CCJs (of less than £5,000) filed against them or which have been identified by Red Flag Alert’s credit risk scoring system which screens companies for a sustained or marked deterioration. It measures working capital, contingent liabilities, retained profits and net worth.

Keith Tully, also a partner at Begbies, added: “We are having conversations every single day with business owners across the Liverpool city region. It’s clear that inflation, labour shortages and repaying debts accrued over lockdowns are the main challenges causing most of this increase in distress over the period.”