Mersey firms face ‘insolvency storm’

Firms across Liverpool city region face an ‘insolvency storm’ in the coming months, according to new data from insolvency firm Begbies Traynor. Tony McDonough reports

Mersey, river, estuary, Liverpool, Wirral, waterfront
Liverpool city region firms are facing an ‘insolvency storm’, says Begbies

 

Insolvency specialist Begbies Traynor are warning firms across Liverpool city region to “brace themselves for a wave of insolvencies this year”.

Begbies has revealed there were 8,993 firms in the Liverpool city region were operating under significant financial distress in the fourth quarter of 2021 – a 3% rise on the previous three quarters (8,719).

Now, with COVID state aid and extra protection measures from creditors being phased out, the firm is warning of an “insolvency storm” in the coming months. In the third quarter of 2021 there was a fall in the number of firms in distress but since then the picture has deteriorated.

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. It measures working capital, contingent liabilities, retained profits and net worth.

Support services, property and construction are the city region sectors worst affected. Jason Greenhalgh, partner at Begbies Traynor in Liverpool, said: “The harsh economic reality of Covid and the rising inflation rate is something that most sectors of our regional economy will have to battle but many, sadly, will lose the fight.

“The combination of furlough ending, loan repayments kicking in, inflation and the increase in companies turning to the courts to recover money they’re owed means were likely to see insolvency rates accelerate further during 2022.

Jason Greenhalgh
Jason Greenhalgh, a partner at Begbies Traynor in Liverpool

 

“With almost 9,000 firms in our region now in significant financial distress, the knock-on effect on the supply chain of these firms means everyone in the business community needs to prepare for challenges ahead.

Nationally, more than half a million firms are now in significant financial distress (589,168) – a 5% rise on the previous quarter. Begbies Traynor also confirmed a 106% rise in the number of County Court Judgements issued in the final quarter of 2021.

“The figures concerning the construction and property sectors are deeply troubling,” added Mr Greenhalgh. “More than 2,500 firms operating in these sectors are in trouble and they are a key part of the success of our regional economy here on Merseyside. 

“The poor availability of raw materials and double-digit inflation has had a major impact on their margins. There are solid indications of overtrading as the boom in the sector, post lockdown, continues to cause major cash flow issues.”

List of sectors seeing the most distress in the city region:

 

1 Support Services 1,387
2 Real Estate & Property 1,260
3 Construction 1,284
4 Health & Education 631
5 Professional Services 536
6 General Retailers 480
7 Bars & Restaurants 446
8 Telecommunications 393
9 Other Manufacturing 304
10 Media 271

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