Recovery could be slow as North-East corporate insolvencies increase

First published in Business News The Northern Echo: Photograph of the Author by , Deputy Business Editor

ECONOMIC recovery could take up to 15 years and conditions may worsen before they get better, according to one of the region’s insolvency experts.

Andrew Haslam, partner for the North-East at insolvency and corporate restructuring specialist Begbies Traynor, said the UK is already seeing a two-speed economy, with growth beginning in the south-east and London, while the rest of the country is stagnant.

The news comes as new figures from business advisory firm Deloitte show Yorkshire and the North-East saw 305 business failures in last year, up nine per cent from 280 in 2011, while all other English regions experienced a drop in administrations, to 1,833, down from 2,009 businesses in 2011.

Mr Haslam said: “Just as it took us ten to 15 years to get into this mess, it is going to take another ten to 15 years to get ourselves out of it.

“People and businesses have got into a mind set of spending based on cheap credit and are waiting for those days to return.

“Without a major catalyst, there is no reason to expect those days to return at all, which is why the economy won’t change significantly for a few years yet.”

Mr Haslam said to the scale of austerity cuts still yet to hit the public sector, and the inability of the Bank of England to further lower interest rates to stimulate spending as factors behind a prolonged period of, at best, stagnation or minimal growth, with conditions possibly worsening before improvement was evident.

“We are already seeing a two-speed economy, with the latest Red Flag statistics showing early signs of growth in London and the south east while the rest of the country is stagnant,” he said.

“Far from addressing this issue, Government policy seems to be reinforcing it, making it even more difficult for regions such as the North-East to suddenly buck the trend and for a true, nationwide recovery to be achieved.”

Neil Matthews, restructuring services director at Deloitte in the North East, said: “The year-on-year figures for the North East are particularly bleak, and are a stark reminder of the difficulties which continue to face businesses. Constrained budgets and the challenges facing all sectors mean it is certain that we will see further distress next year.”

“For retailers, Christmas trading appears to have been reasonable, though not spectacular and not enough to prevent insolvencies in the first quarter of 2013. It is also notable that high profile, nationwide chains continue to be among the casualties despite the shake-up seen in the sector since 2008. Last year alone we have seen Peacocks, La Senza, Blacks, Game, Clinton Cards, JJB Sports and Comet enter administration.”

But Steve Ross, chair of insolvency trade body R3 in the north east and a director in the corporate recovery department of the Sunderland office of accountancy firm RSM Tenon, said although conditions were challenging, it was not all bleak.

“On the upside, R3’s latest research suggests that, unlike the rest of the UK, the number of such ‘zombie businesses’ in the North-East fell in the second half of 2012, and despite the prevailing tough climate, there are clearly still many north east firms that are winning new business, creating jobs and looking optimistically towards a bright future.

“As always, the key for business owners that find their firms simply treading water without much prospect of making progress in the foreseeable future is to take decisive action to address and resolve their situations sooner rather than later.”

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