Latest Red Flag survey from insolvency specialist Begbies Traynor reveals 48% year-on-year rise in Merseyside firms in ‘significant financial distress’ with gyms, retailers and restaurants hardest hit. Tony McDonough reports
There were 6,730 firms across Merseyside in “significant financial distress” in the second quarter of 2024, according to the latest Red Flag data from Begbies Traynor.
In the first three months of this year the regular survey from the insolvency specialist revealed there were 6,013 firms in distress. The rise to the second quarter is 12% but the comparison with the same quarter in 2023 represents a rise of 48%.
Although the economy has been gradually improving over the course of 2024, with inflation way down from the double-digit highs of 2023, there is often a lag effect when it comes to the impact on the real economy.
‘Significant distress’ refers to businesses showing deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.
Sports and health Clubs saw a 58% increase in distress (up to 155 businesses), general retailers a 37% increase (to 398 shops) and the bar and restaurant sector saw a 38% hike in distress (to 264 outlets).
Begbies also identified problems in what are regarded as the core economic sector hubs of Liverpool city region: construction, property, support services and professional services.
Together they make up more than half (52%) of the total (3,476) number of significantly distressed firms.
Stephen Berry, partner at Begbies Traynor in Liverpool, said: “These are sobering figures indeed but those in the thick of doing business in our region will not be surprised.
“They recognise that things are extremely tough not only for their own firm but for those they are doing business with every single day.
“The figures relate to the final quarter of the previous Government and naturally, since July 4 and the election of Labour, business owners will now be anxiously looking for any new business-friendly measures to be implemented quickly.”
Researchers say these figures indicate that people remain adamant in pulling back spending on food, clothing and leisure as families’ spending power continues to shrink.
This annual percentage increase in the region is above the national average of 37% as more than 600,000 firms across the country face financial challenges (601,950).
Jason Greenhalgh, also a partner at Begbies in Liverpool, added: “There is no hiding the fact that a vast number of consumers are still actively seeking to reduce household spend on a daily basis.
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“Inflation and wage stagnation has a huge impact on the fortunes of businesses operating in every sector of our regional and national economy.
“It is deeply concerning that Merseyside’s ‘golden quartet’ of sectors make up more than half of all the distressed businesses in the region and keeping a close eye on how they progress in 2024 will be absolutely essential for all of us.”