More than 9,000 Merseyside firms in ‘significant financial distress’ in final quarter of 2022, reveals Begbies Traynor – up year-on-year but slightly down on the previous quarter. Tony McDonough reports

More than 9,000 Merseyside firms were in ‘significant financial distress’ in the final quarter of 2022 with COVID debts and inflation the chief culprits.

Latest data from the quarterly Red Flag report, produced by insolvency specialist Begbies Traynor, reveals a gloomy picture. It shows in the final three months of 2022, 9,226 city region businesses were classed as being in “significant financial distress”.

This is a 3% increase on the same period in 2021 but slightly lower than the 9,351 reported for the third quarter of 2022. It also showed that 58 city region firms were in “critical distress”. Up 26% year-on-year but marginally better than the 59 recorded in Q3 2022.

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.

It measures working capital, contingent liabilities, retained profits and net worth. A business in critical distress is defined as one with minor CCJs (of more than £5,000) filed against them. Numbers in significant distress by sector are:

• Real estate and property (1,509)
• Support services (1,422)
• Construction (1,238)
• Health and education (572)
• Professional services (561)
• General retailers (505)
• Telecoms (461)
• Bars and restaurants (403)
• Manufacturing (322)
• Automotive (291)

Nationally, more than half a million firms are now in significant financial distress (610,405). Jason Greenhalgh, Partner at Begbies Traynor, said: “Company directors must stay alert and act quickly and decisively as we progress into 2023.

“The conversations we’re having with company directors in Liverpool city region indicate these challenges are being faced in all sectors of our regional economy.

“It’s clear that business owners are working hard to tackle rising inflation, soaring energy bills and doing their best to ward off the impact of what looks like a looming global recession but in too many cases it won’t be enough.”

And Jason’s colleague, Keith Tully, warned: “As interest rates rise and a less generous energy support scheme kicks in, there is more pain to come for SMEs in the region.”

The Red Flag Alert data, published by Begbies Traynor, has analysed the health of companies across the region for the last 15 years.