Huge rise in Mersey firms in ‘significant distress’

Latest Red Flag data from insolvency specialist Begbies Traynor makes grim reading with a 28% surge in Liverpool city region firms in ‘significant distress’ at the end of 2020. Tony McDonough reports

closed sign, shop, retail
A new lockdown due to COVID-19 is likely to push more firms into distress


New data from insolvency specialist Begbies Traynor is revealing a surge in companies in “significant financial distress” across Liverpool city region.

Begbies’ latest Red Flag survey shows there were 8,805 businesses in significant distress in Merseyside during the final quarter of 2020. This is a 9% increase on the previous quarter a huge 28% rise on the figure for the final quarter of 2019.

And with a new national lockdown due to the COVID-19 pandemic in place until at least mid-February, it is likely the situation for many Merseyside businesses is only going to get worse. The COVID vaccine is not expected to have a material impact on the opening up of the economy until the spring or summer.

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.

Begbies’ latest survey makes grim reading for all types of businesses. Of the 22 separate sectors surveyed by the firm, all exhibited an increase in significant distress, with 10 sectors experiencing double digit increases in the final quarter of 2020.

Distress in the financial services sector increased by 42% (from 130 in Q4 2019 to 184 in Q4 2020). Property and property services saw an increase of 35% (865 to 1,172) and distress for hotels and accommodation increased by 25% (81 to 117).

Keith Tully
Keith Tully, partner at Begbies Traynor in Liverpool. Picture by Dominic Salter – LICENSED FOR ONE YEAR FROM 27/10/20


Keith Tully, partner at Begbies Traynor in Liverpool, said: “These figures highlight the deteriorating financial situation for many companies across our region. Without the financial aid and support measures that the Government has put in place during the pandemic insolvency levels would have been much higher.

“A national lockdown policy with no concrete end in sight does little to help worried business owners and their finance directors. Company directors who are running a distressed business must explore all their restructuring options now if they are to survive.

“Getting together a proactive creditor strategy, fresh re-financing package or a tax efficient disposal of the business needs to be high on the boardroom agenda to survive the weeks and months ahead.

“The roll-out of the vaccine offers some light at the end of tunnel but the financial situation for many businesses will remain bleak over the next quarter and beyond.”

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