Business distress in NI soars compared to rest of the UK

Companies in Northern Ireland are already seeing escalating economic pressures starting to bite, according to new research from local business rescue and recovery specialist Begbies Traynor.

Based in Belfast, the firm’s latest survey revealed that advanced financial distress in the province had already risen much more sharply here in the latest quarter than in other parts of the UK.

According to the latest Red Flag Alert data published today (October 19), in the third quarter of 2022 there was a 67% increase in the number of businesses in ‘critical’ distress (which refers to companies that have financial problems such as CCJs of more than £5,000 filed against them) in NI compared with the previous three months. The figures also revealed a 11% rise since Q3 2021.

Across the UK as a whole, this type of advanced distress saw a quarterly increase of just 7% and an annual increase of 25%.

The Red Flag Alert figures also showed an increase in the number of firms displaying early or ‘significant’ distress which includes having had CCJs of less than £5,000 filed against them. In NI, ‘critical’ distress increased by 3% since the previous quarter and by 6% year on year.

The new data shows that in the latest quarter of 2022 over 8,000 firms in the province displayed symptoms of this type of early stage distress. The UK-wide figures showed a 4% rise since Q2 2022 and an 8% increase compared with the same period the previous year with more than 600,000 firms suffering ‘significant’ distress in Q3 2022.

However in NI, the sectors which saw the largest increase in ‘significant’ distress year on year were hotels and accommodation (up by 34%); telecommunications (increase of 21%); construction and industrial (both up by 14%) and media and utilities (both rose by 12%).

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

Lawrence O’Hara, who leads Begbies Traynor in NI, said: “It is concerning to see levels of advanced distress in the province 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 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 as they cope with escalating energy costs as well as rising inflation and mortgage rates, the economy seems increasingly likely to fall into recession and businesses should prepare for the worst.

“Confidence is falling among businesses 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.”