A new report says there are some encouraging signs for North East businesses - with the region performing more strongly than other parts of the UK.
Although there are still clear fears of another recession in the face of the cost of living crisis, the latest data from rescue and recovery specialist Begbies Traynor shows some slim hope in relation to the number of ‘critical distress' situations firms are facing.
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Its latest Red Flag Alert data published today shows that, in the North East, the more advanced ‘critical’ distress (which refers to companies that have financial problems such as CCJs of more than £5,000 filed against them) rose by 10% compared with the same period the previous year, although the UK as a whole saw an increase of 37%.
It also revealed a fall of 29% in this type of advanced distress in the region in Q2 2022, compared with the previous quarter; in contrast, there was a 3% rise across the UK quarter on quarter.
In terms of ‘significant’ or early-stage distress (which refers to businesses that have had CCJs of less than £5,000 filed against them), the North East reflected a similar picture to that across the UK.
In the second three months of 2022, the North East saw a fall of 12% compared with Q2 2021, while the national figure was -11%.
In the three months from April to June 2022, over 11,300 businesses in the North East experienced instances of early stage distress and this affected almost 582,000 businesses across the UK.
Andrew Little, partner for Begbies Traynor in the North East, said: “While it is encouraging to see instances of ‘critical’ distress in the region bucking the national trend in the last quarter, we are concerned that this type of more advanced distress has risen in the North East since the previous year, along with growing early stage distress since the previous quarter.
"With the UK economy facing ongoing uncertainty over the impact of Brexit and soaring energy costs, along with continuing supply chain issues as China faces further Covid lockdowns, it looks like businesses need to prepare for some tough times ahead.”
Looking at ‘significant’ distress across the sectors in the North East, the worst affected since Q1 2022 were travel and tourism, up by 23%; utilities, 14% rise; printing and packaging, increase of 7%; and bars and restaurants, financial services, food and drug retailers, industrial and telecommunications which all saw a rise of 5%.
The only sectors to see a fall in early signs of distress quarter on quarter in the region were hotels and accommodation; leisure and cultural activities; health and education; food and beverages and support services.
Fellow partner for Begbies Traynor in the North East, Gillian Sayburn, added: “While these latest figures are not as bad as might be expected given the escalating cost of living crisis, there is a very real concern that they mask the real strain of inflation with the full impact yet to be felt.
"Already, the latest GDP figures for May have shown a decline in consumer-facing services with a fall in retail sales and sports activities and recreation. With many people starting to feel pressure to pay household bills and the prospect of further energy rises in the coming months, businesses are likely to feel the impact as consumers rein in discretionary spending."
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