'Critical business distress' in Northern Ireland soars compared to rest of the UK

More business in Northern Ireland are showing signs of 'advanced financial distress' according to Begbies Traynor's latest Red Flag Alert report
More business in Northern Ireland are showing signs of 'advanced financial distress' according to Begbies Traynor's latest Red Flag Alert report

THE number of cash-strapped companies in Northern Ireland rated as being in “critical financial distress” is rising 10 times faster than the rest of the UK, according to a quarterly snapshot of the region's corporate health.

The latest Red Flag Alert report from business rescue and recovery specialist Begbies Traynor shows that in the third quarter of this year there was a 67 per cent increase in the number of local firms in ‘critical’ distress compared to just a 7 per cent rise for the rest of the UK.

‘Critical’ distress refers to companies which have financial problems such as county court judgments (CCJs) of more than £5,000 filed against them.

The numbers displaying early or ‘significant’ distress (that includes having had CCJs of less than £5,000 filed against them) is also soaring, the report says.

Indeed the report points to more than 8,000 firms in the north admitting to some degree of stress right now.

Sectors here which saw the largest increase in significant distress year-on-year were hotels and accommodation (up 34 per cent), telecoms (up 21 per cent), construction and industrial (both up 14 per cent), and media and utilities (both up 12 per cent).

Only six sectors - bars and restaurants; food and drug retailers; general retailers; health and education; printing and packaging; and wholesale - saw a fall in ‘significant’ distress compared with the third quarter of 2021.

And given the impact of rising inflation, allied to higher labour, material and energy prices, and combined with faltering consumer and business confidence, it point to an exceptionally difficult economic backdrop which may lead to many companies in Northern Ireland going to the wall in the coming months.

Lawrence O’Hara, who leads Begbies Traynor in Northern Ireland, says: “It's hugely concerning to see levels of advanced distress here rising considerably quicker in the third quarter of the year than they have across the rest of the UK.

“After the turmoil of Covid, many businesses have already depleted their cash reserves and, in addition to the impact of the current cost of living crisis, they are now suffering from the withdrawal of government support and pressure to repay debt such as the Government’s bounce back loans.

“With consumers facing a fall in disposable income, the economy seems increasingly likely to fall into recession, so businesses should prepare for the worst.”

He added: “Confidence is falling among businesses too as they struggle to operate despite spiralling gas and electricity costs, and continuing supply chain and labour issues.

“With no end in sight to the current challenges, businesses would be well advised to get help from qualified insolvency professionals at the first signs of distress when they will have more tools at their disposal to stop the situation from escalating.”