The number of active businesses across the North East has risen by 1.7 per cent over the third quarter of the year – but the proportion of regional firms with a raised risk of insolvency rose has increased at a faster pace through the same period.
New business stability research by insolvency and restructuring trade body R3 has found a net increase of 1,373 firms being based in the North East since June, with the number rising from 81,331 in June to 82,704 this month.
However, the proportion of North East firms with a higher than normal risk of entering insolvency in the next 12 months has risen from 40% to 42% across Q3, carrying on a trend that has seen it consistently rising from the 35% mark at which it stood at the start of 2018.
Overall, regional firms in seven of the 11 key industries that R3 monitors currently have a better or identical rate of business stability when compared with the national average, with the cross-sector average for all North East industries being slightly better than the overall national figure (43%).
The North East pub and restaurant sectors currently have the lowest proportion of companies at higher than normal insolvency risk of any region in the UK, while the hotel and agriculture sectors are in second place in their respective lists.
By contrast, the North East’s professional services and retail sectors are struggling in comparison to rivals around the UK, with both sitting two from the bottom of their respective sectoral tables.
R3’s insolvency risk tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.
Andrew Haslam, chair of R3 in the North East and head of specialist business advisory firm FRP Advisory LLP’s Newcastle office, says: “Despite any number of commercial and political uncertainties, the North East’s entrepreneurial spirit is continuing to drive the number of active businesses in the region upwards, even when the relentless rise of the regional insolvency risk indicates that we will also have sadly lost many firms over the summer.
“The warm summer weather, England’s World Cup success and the various events that made up the Great Exhibition of the North will all have helped to get people out and about, and our leisure sector businesses have clearly reaped the rewards of this.
“However, there isn’t a great deal of evidence that these crowds were spending as much with our regional retailers as they would have liked, and as we enter what should be the most profitable part of the year for the sector, store owners will doubtless be hoping that we all start our Christmas shopping sooner rather than later.
“Issues can arise for any business in any sector at any time, and owner/managers need to take swift action if they foresee potential problems down the line, so they have the best possible chance of tackling them successfully.”