Growing 'financial distress' hits hard in construction and retail

Retail and construction were the worst-hit sectors for businesses in distress i the first quarter of this year, new data shows
Retail and construction were the worst-hit sectors for businesses in distress i the first quarter of this year, new data shows

BUSINESSES in Northern Ireland are experiencing escalating levels of ‘critical’ distress, with the construction and retail sectors being hardest hit, new data shows.

The latest quarterly Red Flag Alert from insolvency specialist Begbies Traynor shows that in the first three months of this year, the number of firms in trouble (those with CCJs against them and those showing a marked deterioration in key financial ratios) was 128 per cent higher than in the first three months of 2018, and it compares with a year-on-year rise in ‘critical’ distress of just 17 per cent across the UK as a whole.

And the north’s largest sector, construction, saw one of the most dramatic leaps in ‘critical’ distress over the quarter, with 15 building companies now affected compared with just four in 2018.

By contrast, advanced distress in construction across the UK as a whole grew by just 13 per cent over the same period.

Critical distress in construction in the north also saw a marked rise since the previous quarter, increasing by 114 per cent against just 11 per cent across the UK as a whole.

Northern Ireland also suffered from the ongoing woes facing the high street, with retail seeing a 100 per cent uplift in advanced distress between January and March compared with the same period the previous year.

This trend was even more marked quarter on quarter, with four retailers suffering from ‘critical’ distress compared with just one in last year. But across the UK, advanced distress in the retail sector fell by 5 per cent year on year and 2 per cent quarter on quarter.

The rate of increase in ‘critical’ distress across all sectors had also shown marked growth since the previous quarter, with levels rising by 86 per cent in Northern Ireland, compared with a rise of just 6 per cent across the UK.

Lawrence O’Hara, who leads Begbies Traynor in Northern Ireland, said: “Unfortunately, we are continuing to see an upsurge with advanced distress here as both businesses and consumers face the unknown. One of our most important sectors, construction, is bearing the brunt which is likely to have a knock-on effect on many other sectors. We are also seeing falling consumer confidence adding to the many challenges facing retail.

“However, on a more positive note, the global popularity of the Game of Thrones TV series is helping to bring more visitors here, with falling levels of both early and advanced distress in travel and tourism.

“While the latest official figures for the first quarter of 2019 show that unemployment in Northern Ireland was even lower than in the rest of the UK, there are concerns that we are seeing growing redundancies as more businesses fail, and this too will have a negative impact on the economy.”

Looking at levels of ‘significant’ or early distress (which refers to businesses which have had winding up petitions or CCJs totalling more than £5,000 against them), 6,781 firms were affected in quarter one, a one per cent fall on 2018.