Plan for the future while the going’s not so bad, say Begbies Traynor
It would seem that the run up to Christmas had a positive effect for many retailers in the Liverpool City Region, with around 4% fewer companies experiencing financial difficulties in the final quarter of 2014, compared with the period to the end of September.
In fact, the number of businesses in the region facing significant financial difficulty fell generally in the final quarter of last year, according to the latest Red Flag Alert report from business rescue and recovery specialists Begbies Traynor.
The research found that the number of businesses facing financial distress fell by around 8% from the previous quarter, with 1,782 firms across the city experiencing problems compared with 1,935 in quarter three.
Professional and financial services businesses also had a positive fourth quarter, with 38% fewer professional service firms and 31% fewer financial services firms experiencing significant financial difficulty.
Despite the positive quarter-on-quarter results, most sectors saw a rise in the number of businesses experiencing financial problems when compared with the same period last year, with 6% more firms across the region in significant financial difficulty, compared with the same quarter in 2013.
John Fairbrother, managing partner in corporate recovery at Begbies Traynor in Liverpool, said:
“Liverpool has had a positive final quarter, with the number of firms experiencing financial difficulties dropping while neighbouring cities such as Manchester saw a marked increase.
“Although with most sectors experiencing year-on-year rises and many bellwether sectors having a difficult final quarter, it is apparent that many businesses may struggle in 2015.”
Liverpool’s leisure sector struggled in the final quarter of 2014, with 34% more businesses reporting significant financial difficulties compared with the three months to the end of September, and a year-on-year rise of 16%.
Construction also saw a rise in the number of companies experiencing significant financial problems, with 7% more firms in difficulty than in quarter three, and 85% more than in quarter four 2013.
“A number of reports continue to indicate that North West businesses are becoming less confident about their future prospects. This, combined with increased pressure in the market, may lead to a further slowdown in the economy in the first quarter of 2015.
“It is therefore vital that companies start to plan for the future in order to avoid hazards which can have a significant effect on a company’s cash flow or financial situation.
“One way to do this is to ensure that the working capital available within the business is adequate as cash rather than profit is all important when managing finances within a challenging business environment.
“It is also essential to create a clear business plan that realistically reflects a firm’s future trading prospects, and allows them to continue trading, or grow, at a manageable rate without increasing their cost base – one of the main causes of financial difficulties for businesses.”
Begbies Traynor are the UKs leading corporate rescue and recovery practice and work with a range of organisations, from small businesses to large corporations.
John Fairbrother has worked with Begbies Traynor since 1995, having previously worked at KPMG. John is an expert in delivering solutions for company directors and businesses owners, financial institutions and professional advisers in the areas of corporate recovery, restructuring and turnaround.
For more information visit www.begbies-traynorgroup.com