Signs of recovery amid fall in Mersey firms in distress

Latest data from insolvency specialists Begbies Traynor reveals more than 10,000 firms in distress in Liverpool city region during the second quarter, lower than the first quarter. Tony McDonough reports

Construction, building, skills, housebuilding, trade, industry
Construction is one of the sectors hardest hit by the pandemic


More than 10,000 businesses across Liverpool city region were in ‘significant final distress’ in the three months to June 30, new data reveals.

According to the latest quarterly Red Flag survey from insolvency specialists Begbies Traynor, there were 10,274 firms in significant distress the second quarter of 2021. This is 29% higher than the same period last year but 10% lower than the first quarter of this year. This indicates recovery from the pandemic was now under way.

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 April, Begbies reported that there were 11,365 firms in Liverpool city region in significant distress in January, February and March this year. However, the reopening of the economy over the past couple of months appears to be having a positive impact.

Sectors with the highest level of distress in the region by sheer volume of companies were support services (1,576 – a 23% rise on last year), construction (1,531 – a 37% rise on last year) and property (1,413 – a 41% rise on last year).

However, it is worth noting that all three of these key sectors in the city region saw recovery in Q2 of 2021 compared to Q1 of 2021. Support services saw a quarterly decrease in distress of 11%, construction saw a 10% reduction and property a 5% reduction.

Nationally, there are now 651,492 firms who are currently in significant financial distress which is a 24% increase on the same time last year (526,967).

Keith Tully, partner at Begbies Traynor in Liverpool, said: “The 10% reduction in businesses who are experiencing significant financial distress is certainly welcome news for all business owners and employees in the Liverpool city region.

“We’re certainly not quite out of the woods yet though and the hard fact remains that there are more than 10,000 companies in our region who are still facing significant financial challenges.

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


“That number will be of major concern not only to the company directors running those firms but to other businesses connected to them in the supply chain.”

And Jason Greenhalgh, another partner at Begbies in Liverpool, added: “With recent changes to the UK roadmap out of lockdown and ongoing uncertainties related to the ‘pingdemic’ issue many companies are still in a precarious position. Sadly, any further lockdowns or restrictions introduced later this year could well be the final straw for many of them.

“The ongoing servicing of existing commercial finance arrangements coupled with fresh debt repayments kicking in from bounceback loans and CBILs means it’s likely to be a hard, hot summer for many businesses across our region.”

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