The North East construction sector is slowly making progress against its regional rivals in terms of business stability – but it still has a long way to go to make it to the top floor.
According to monthly research compiled by insolvency and restructuring trade body R3, the proportion of regional construction firms with a raised risk of getting into financial difficulty in the next year was the highest of any part of the UK for the whole of 2016 and the first half of this year.
The North East sector finally moved ahead of its South East peers back in August – and now, it has moved into tenth place in the 12-strong table after recording a better business stability ranking in October than its South West equivalent.
The regional industry is now only just behind its peers in Yorkshire and the East of England in terms of business stability, and just one percentage point below the national construction industry average (29%).
Elsewhere in R3’s research, regional firms in six of the 11 key industries that it monitors currently have a worse rate of business stability than the national average for their respective sectors.
The region’s hospitality industries are continuing to do well in the run up to Christmas, with the pub and restaurant sectors recording the second best performances in the UK in terms of business stability, and the hotel sector coming in fourth in its list.
But the North East manufacturing, retail, professional services and technology sectors all currently have lower levels of business stability than their respective national industry averages.
Overall, 30% of all North East businesses have a heightened risk of entering insolvency in the next year, which is the same as this month’s cross-sector national average, but is three percentage points up on where it stood three months ago.
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.
Neil Harrold, chair of R3 in the North East and a partner with Hay & Kilner Law Firm, says: “The North East construction sector was hit incredibly hard by the economic downturn in 2008. It has taken longer to begin to recover from this than pretty much any other sector, and we’re still sadly seeing well-known industry names going out of business.
“But at the same time, it’s hard to remember a busier time across the region for new construction projects, especially in the leisure, housing and student accommodation markets, and there’s so much going on in so many places that it’s difficult to keep track of it all.
“The improvements in business stability that we’ve seen in the construction sector in recent months have only been small, but any positive news will be welcomed by firms in this sector and we’ll hopefully continue to see progress being made in the coming months.
“The wider regional picture remains fairly mixed in terms of business stability, and in a time of continuing uncertainty, management teams need to be positioned to act quickly if they see any issues arising, so they have the best chance of addressing and overcoming them.”