Insolvency specialist Begbies Traynor says there has been a 15% fall in Liverpool city region firms in distress but warns there are still tough times ahead for many businesses. Tony McDonough reports

Firms across Liverpool city region are showing clear signs of recovery as new data from insolvency specialist Begbies Traynor reveals a big drop in businesses in distress.

According to Begbies’ latest quarterly Red Flag survey, there was a 15% reduction in businesses in “significant distress” in the city region in the third quarter of 2021. Biggest falls were in the construction, industrial transportation and manufacturing sectors.

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 July, LBN reported that more than 10,000 city region firms were in significant distress in the second quarter as the pandemic continued to take its toll. However, in July, August and September this number had fallen to 8,719.

Some sectors of the regional economy still retain high volumes of distress in the region by sheer volume. These are support services (1,323), construction (1,253) and real estate and property (1,257).

Nationally, there are now more than half a million firms (562,550) who are currently in significant financial distress. CCJ’s are often a bellwether for insolvency and the latest data paints a gloomy picture. Figures show that court activity is picking up as creditors, especially landlords, become more aggressive in chasing debts.

Keith Tully, partner at Begbies Traynor in Liverpool, said: “The percentage fall in business distress across the Liverpool city region is certainly good news and gives directors some breathing space as they recover from the pandemic.

“However, the sheer numbers of firms still in financial peril is worrying. Every day we’re having conversations with business owners and their advisers and the same two issues keep cropping up.

“Firstly, there are huge challenges for many companies in repaying bounceback loans they’ve taken out. Secondly, creditors, including HMRC and landlords are taking an increasingly aggressive line in chasing debts.”

Another at the Begbies office in Liverpool, Jason Greenhalgh, said he anticipated an acceleration of insolvency rates in 2022, especially where directors have seen the funds running low and exhausted their options.

“The increase in CCJ’s and court activity will likely continue to increase as we head towards and into 2022,” he said. “The result is that we are seeing more directors exploring short to medium term insolvency options.”

Despite the positive tone from the Begbies data, business confidence in the North West fell five points during October to 42%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the region reported lower confidence in their own business prospects month-on-month, down three points at 47%. When taken alongside their optimism in the economy, down nine points to 36%, this gives a headline confidence reading of 42%.

The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.