New data released today by Begbies Traynor in Preston reveals the number of Lancashire-based firms operating on the brink has risen to more than 9,000 as business challenges mount up for SME’s.
In Q3 of 2023, the number of firms in Lancashire operating in ‘significant’ financial distress was 9,323 according to the research. This is a year-on-year increase of 7.76% (up from 8,652) and a quarterly jump of 9.93% (up from 8,481).
This latest data is sourced from the Begbies Traynor Red Flag dataset which tracks key factors behind company distress and failure rates.
‘Significant distress’ refers to businesses showing deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.
The professional services sector in the Lancashire region, which includes lawyers and accountants saw a remarkable leap in distress of almost 30% (30.09%) as advisory firms feel the effects of distress in other sectors of the regional economy.
The largest volume of distressed businesses are found in a trio of key economic sector hubs in the Lancashire region: Construction, Real Estate and Support Services which, together, make up 39% of the total (3,656) number of significantly distressed firms.
The number of significantly distressed firms in the Bars and Restaurants sector, another signal of economic activity, has increased by 8% (8.14%) compared to last year and there are now 279 local companies, many family-owned, struggling to survive.
“If this trend continues, we may see more than 10,000 firms across our region entering significant financial distress before the end of the year. The effects of inflation, high interest rates and energy prices in 2023 are taking their toll and are evident in this data.
“Construction, property and professional services are key sectors of our regional economy and the sheer volume of firms in distress in these sectors is a worrying indicator as we head towards the end of the year.
“Business owners will be hoping for a glimmer of hope in the form of positive announcements in the Autumn Statement later this month geared towards supporting entrepreneurs. The current global challenges as well as the fact a General Election is looming next year add to an air of uncertainty.
“Ultimately, business owners need to act fast if they find their finances being drained by the burdens they face. The pressure is on for thousands of businesses across Lancashire and the acceleration of insolvency rates we have seen in recent weeks looks likely to continue. Company directors who find their business in financial distress should take swift action before their options run out.”
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