Rise of 28% in NI companies showing early financial distress signs, warns insolvency specialists
There are significant signs of financial distress in 10,000 companies across NI - a rise of 28% more than last year, a leading insolvency company has said.
The comments are based on analysis of the latest Red Flag Alert data by a leading UK business rescue and recovery specialist, Begbies Traynor.
Despite growing business distress, the company fears that the real picture is even more bleak with financial problems being masked by the Government’s ongoing support measures, together with the pragmatic approach of lenders and HM Revenue and Customs.
Begbies Traynor notes that the quarterly Red Flag Alert research, which monitors the UK’s financial health, reveals that in the second quarter of 2021, levels of ‘significant’ or early distress in NI companies rose by 28% compared with the same period the previous year.
This was slightly higher than the rest of the UK which saw a 24% rise. In the second quarter, almost 10,000 businesses in the province and 650,000 businesses across the whole of the UK felt the impact of this type of distress.
However, on the positive side, the figures also show that the number of NI companies in early distress dropped by 15% since the first quarter of the year. In addition, Begbies Traynor noted that the prediction of a flood of UK companies going bust due to the pandemic has not been accurate.
Lawrence O’Hara, who leads Begbies Traynor in Northern Ireland, said: “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.”
As businesses cope with the end of government support schemes and the impact of Brexit, he said it is “vital” businesses enlist professional advice.
In NI, the financial services sector along with automotive were among the worst affected, both seeing a 45% hike in early distress; leisure and culture with a 39% rise; and construction up by 35%. Telecoms, hotels and accommodation and utilities fared better with rises of 15%, 11% and 9% respectively.
NI also saw an increase in advanced ‘critical’ distress cases - companies with debts of more than £5000 - last quarter, surging 33% compared with the first quarter of 2021. This compared with a fall of 10% across the whole of the UK.
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