In its latest Red Flag survey, insolvency specialist Begbies Traynor reveals there are now more than 8,000 Merseyside firms in ‘significant financial distress’ amid the COVID-19 crisis. Tony McDonough reports
Thousands of Merseyside businesses are in ‘significant financial distress’ with almost 200 gyms alone on the verge of going bust, grim new data reveals,
In its latest quarterly Red Flag Alert survey, insolvency specialist Begbies Traynor lays bare the devastating impact of the COVID-19 crisis on businesses across the Liverpool city region.
It reveals that more than 8,000 firms on Merseyside are in ‘significant financial distress’, despite Government support measures. There has been a 17% surge in firms in financial turmoil. Bars and restaurants have seen a 12% increase in distress.
Begbies says almost 192 gyms in the region are “on the brink”, despite the reversal of the initial decision to order their closure under Tier 3 COVID restrictions. This represents a 31% rise. The report shows 91% of all business sectors analysed saw a quarterly rise in distress levels.
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. In the three months to September 30, 8,073 Merseyside firms were in this category.
The closure of hospitality venues and nightspots combined with social restrictions contributed to a 12% year-on-year increase (up from 323 firms to 362) in significant financial distress in the bars and restaurants sector.
During the period of ‘Eat Out to Help Out’, the Government’s campaign to support the sector, more venues fell into significant distress with a 3% rise on the previous quarter (from 353 to 362).
Leisure and culture, a key component of the Liverpool economy has seen a 27% increase in distress (from 159 firms up to 202) as venues struggle with events being cancelled or postponed.
Keith Tully, partner at Begbies Traynor in Liverpool, said: “These figures are a stark reminder of the challenges business owners face in keeping their business afloat as we head into a period of tighter restrictions. Bars and restaurants which are such an important part of the night-time economy in Liverpool in particular continue to face serious pressure.
“This impacts not just national chains such as Gourmet Burger Kitchen who recently entered administration and Pizza Express who confirmed closures, but also family-owned, independent venues across our region who are fighting tooth and nail to survive.
“The lockdowns are not only taking their financial toll. The restrictions on gyms mean that almost 200 are at serious risk of going under which will obviously impact the health of people across Merseyside.
“The decisions that company directors in all business sectors take over the coming weeks will be critical to the survival of many firms across our region. In many cases company directors will need to restructure not only their finances but their operations and infrastructure to weather the winter ahead.”