Construction slump adds to north's economic woes as more firms 'in distress'

More construction firms in the north are said to be in critical distress according to Begbies Traynor
Gary McDonald Business Editor

SCORES more firms in Northern Ireland - primarily in the construction sector - are showing signs of financial stress as the health of a number of companies deteriorated in the second quarter.

Data from business recovery specialists Begbies Traynor has found that at the end of June, building firms in the north which confirmed they were experiencing "critical" financial distress was up 275 per cent quarter-on-quarter.

‘Critical' refers to businesses that have had winding up petitions or county court judgments totalling more than £5,000 against them.

But the figures - which are contained in the latest quarterly 'Red Flag' alert from Begbies Traynor - are less stark in other sectors in Northern Ireland.

That 275 per cent rise in construction firms locally in critical distress contrasts with just a 10 per cent increase across the UK as a whole from April to June.

Year on year, ‘critical' distress in the sector rose by 114 per cent in Northern Ireland while it fell by one per cent UK-wide.

Looking at early or ‘significant' distress, the construction sector in Northern Ireland appears to have steadied, with a one per cent fall since quarter one, the same level as across the whole of the UK.

Lawrence O'Hara of Begbies Traynor in Northern Ireland, said: “These figures reinforce the slowdown in the construction sector which we have been seeing, borne out by the recent insolvencies in Northern Ireland.

"The quarter on quarter increase in advanced or critical distress is particularly stark and doesn't bode well either for construction firms or for the many other businesses, such as suppliers and sub-contractors, which depend on them.”

Northern Ireland has seen a year-on-year rise of 11 per cent in critical distress across all sectors, while the UK-wide figures fell by 7 per cent, and there was a whopping 133 per cent rise in the number of businesses in Northern Ireland experiencing critical distress since the previous quarter, which compares with just 10 per cent nationally.

In terms of ‘significant' distress, 6,759 businesses in Northern Ireland showed signs of these less advanced financial problems.

Mr O'Hara added: “Despite the lack of economic momentum across the UK in 2017, businesses in Northern Ireland appear to be relatively robust and are performing more strongly than many other parts of the UK.

“Although levels of businesses in ‘significant' distress in the province have risen only slightly year on year and have, in fact, fallen compared with the previous quarter, it is worrying to see the more advanced ‘critical' distress continuing to grow, with a massive leap since the first quarter of 2018.

"With ongoing uncertainty about the impact of Brexit, together with consumers feeling a squeeze on household incomes, there is concern that this lack of confidence will act as a drag on the economy.”

Sectors locally with the biggest increases in significant distress since the same period last year were utilities (51 per cent rise), leisure and cultural activities (15 per cent), travel and tourism (12 per cent) and sports and health (8 per cent).

In contrast, financial services saw a drop in significant distress of 17 per cent; printing, and food and drug retailers both fell by 11 per cent; and general retailing, and food and beverages, both saw a 9 per cent fall since the second quarter of 2017.

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