Concern real picture of Northern Ireland business distress still being artificially suppressed
ALMOST 10,000 businesses in the north experienced significant or early signs of financial distress during the second quarter of 2021, according to recovery specialist Begbies Traynor.
The company's quarterly Red Flag Alert analysis found the number of firms reporting levels of such distress 28 per cent higher than the same period last year.
The research detected a slight dip between the first and second quarters of the year in the ‘significant' distress category, but Lawrence O'Hara, who leads Begbies Traynor in Northern Ireland, said there is concern that the real picture is being artificially suppressed by government support measures, together with the pragmatic approach of lenders and HMRC.
“It is not only concerning to see rising levels of early signs of distress compared with last year, but we are also worried that the true extent of financial problems being stored up by businesses here and across the rest of the UK, is actually much worse than the figures indicate.
"The flood of insolvencies widely predicted post-pandemic has not come to pass with relatively low numbers of businesses failing in the first six months of 2021.
"However, the government has extended its Covid support measures and these, together with a supportive lending environment, have helped firms to trade through the pandemic and masked underlying distress."
The data suggested cases of the more advanced ‘critical' distress in Northern Ireland, rose by 33 per cent between the first and second quarters.
The category includes businesses that have had winding up petitions or county court judgments totalling more than £5,000 made against them.
The Red Flag report showed the financial services sector and the automotive were among the worst affected in Northern Ireland, both seeing a 45 per cent hike in early distress on last year.
Leisure and culture (+39 per cent) and construction (+35 per cent) also reported spikes.
“With the prospect of the Job Retention Scheme among others starting to be wound down in the autumn, the real scale of distress after 18 months of lockdowns and disruption will soon be revealed,” said Mr O'Hara.
“As businesses struggle to cope with the impact of the pandemic along with Brexit, it is vital that directors proceed with caution and enlist professional advice to help navigate through this extremely difficult trading environment.”