Merseyside firms in distress soar by almost 50%

Latest Red Flag survey from insolvency and business rescue experts Begbies Traynor shows thousands of Liverpool city region firms are fighting for survival amid the COVID pandemic. Tony McDonough reports

construction, building, industry, cranes
Construction is one of the sectors worst affected, according to Begbies


There were 11,365 business across the Liverpool city region in “significant financial distress” in the first quarter of 2021 – 46% higher than the same period last year.

In a clear indication of the severity of the impact of the COVID-19 pandemic, and multiple lockdowns, the latest Red Flag survey from insolvency and business rescue experts Begbies Traynor, shows thousands of firms are fighting for survival.

Begbies monitored the level of financial distress in 22 key sectors of the regional economy in January, February and March. In the same three-month period last year, just prior to the pandemic, the number in significant distress was 7,790.

The latest figure is also 21% higher than in the final quarter of 2020 when the survey recorded  9,414 struggling businesses across Liverpool, Wirral, Sefton, Knowsley, St Helens and Halton.

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.

In terms of volume, the support services sector is the hardest hit in the region with 1,771 companies now in significant financial distress (a 39% increase on last year from 1,278). Construction sees 1,709 (a 57% increase from 1,090) and property 1,488 (a 51% increase from 985).

Keith Tully, partner at Begbies Traynor in Liverpool, said the latest figures indicate that survival may not be possible for many firms in the region and directors must take swift action. He added: “This is the story of businesses in our region fighting to stay alive after a year of the most challenging business climate in living memory.

“It’s important to note that these businesses that are in distress are still trading and still working hard to stay afloat.  The stark reality is that not every business can be saved, and directors need to explore every single avenue in terms of restructuring or refinancing. Creditors of these firms in distress are also feeling the impact.

“The coronavirus pandemic has reduced court activity limiting the number of CCJs and winding up petitions being issued against indebted companies and there has been a ban on winding up petitions for COVID-related debts.

“The pressure is building, and we all need to brace ourselves for a raft of companies being swept away if directors don’t take action. The roadmap for opening up the economy set out by the Government is an opportunity for businesses to bounce back. 

“But it needs management teams across our region to step up to the plate to tackle any fundamental cashflow problems in their business now before it’s too late.”

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