Business

Reduced risk of insolvency at Northern Ireland firms

Northern Ireland firms are at a lower risk of insolvency
Northern Ireland firms are at a lower risk of insolvency Northern Ireland firms are at a lower risk of insolvency

THE risk of Northern Ireland firms becoming insolvent is in decline, according to trade body R3.

The organisation said April was a "month for optimism" across the north's key sectors.

R3 tracks 10 sectors and found seven of those were at less risk of insolvency than a month ago while another had seen no change.

However, the hotel sector experienced the greatest increase in the proportion of businesses at heightened risk of insolvency (6.3 per cent), followed by professional services (3.1 per cent).

Looking at the overall picture, R3 found 22.8 per cent of firms were considered higher than normal risk of insolvency - down 1.7 per cent from last month.

However, the figure is much more favourable than the UK average of 25.5 per cent.

R3's chairman in the north Michael Neill - a partner at A&L Goodbody - said: “The latest results are a welcome indicator of the financial stability of Northern Ireland’s key business sectors. It’s promising for companies to start the new Financial Year in good health.

“Hotels in particular have had a very strong start to 2016 which in-turn should be boosting spending in other local businesses.

“The Northern Irish economy is slowly beginning to rebound, with business output rising at a stronger rate than any other UK region. This should hopefully mean that more businesses are directly feeling the benefits of recovery.

“With the introduction of the National Living Wage this month it is important for businesses to consider the longer term implications for cash flow. The financial impact will likely be greater for smaller businesses so it’s important they plan ahead.”

Of the 10 key sectors tracked by R3, only pubs (3.66 per cent) and transport and haulage (2.89 per cent) saw an increase in their risk of insolvency this month, while manufacturing saw no change.

Mr Neill added: “The proportion of pubs in Northern Ireland at heightened risk has been increasing monthly since the start of the year. The pub trade has faced mounting pressure in recent years but hopefully business will pick up as we move into the summer months.

“For any company struggling with financial difficulties, seeking early advice is the best way to secure a successful turnaround.”

The figures are from R3’s latest insolvency risk tracker. The tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures the proportion of businesses across selected sectors that have a heightened risk of entering insolvency in the next year.