Food and drink sector suffers amid rise in Mersey firms in distress

Latest Red Flag Alert report from insolvency specialists Begbies Traynor says 6,901 companies experienced significant financial distress in 2019. Tony McDonough reports

Merseyside’s food and drink sector saw the biggest rise of businesses in distress, Begbies says

 

There was an increase in the number of Merseyside firms in distress in the final quarter of 2019, new data shows – with the food and drink sector seeing the biggest rise.

According to the latest Red Flag Alert report from insolvency specialists Begbies Traynor, out of 22 business sectors in Mersyside, 12 of them experienced an increase in significant financial distress in the three months to the end of December.

In total, 6,901 companies experienced significant financial distress in the region at the end of December 2019 – up from 6,777 on the previous year – with the figure possibly heading above 7,000 this year.

Merseyside, however, fares marginally better than the national average percentage increase in levels of distress (3%). There are now almost 500,000 firms across the UK in significant financial distress (494,045 compared to 481,590 at the same time the previous year).

A business in significant distress is one with minor County Court Judgements (less than 5,000) filed against them. One in critical distress will have minor CCJs of more than £5,000 and is often a precursor to formal insolvency.

In Merseyside, food and drink saw the biggest year-on-year percentage increase of 18% (103 companies compared to 87 at the same time the previous year). Industrial transportation followed with a 16% increase  (from 170 to 198 companies) and sports and health clubs saw a 15% increase (137 to 158 companies).

Keith Tully, partner at Begbies Traynor in Liverpool, said: “Uncertainty about the outcome of the General Election in the final quarter of 2019 may have been a key factor in forcing many companies into this position.

“Now that the Government is settled for the next five years and we know Brexit will happen on January 31, there is at least some kind of political stability for companies to build on.

Keith Tully, partner at Begbies Traynor in Liverpool. Picture by Dominic Salter

 

“Business owners will still be hoping for some highly positive news in the most eagerly anticipated Budget for a number of years in March. Tax breaks and other financial incentives are keenly expected.

It is concerning that in a region like ours which prides itself on its sporting heritage that we’ve seen large increases in distress in these particular sectors. We know that many sports facilities in our region are finding it challenging to survive and this proves they are clearly feeling the pinch. 

“If the trend we’ve detected in our latest research continues during 2020, we could, for the first time, see more than 7,000 companies on Merseyside fall into significant financial distress.”

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