The North East economy has seen a mixed start to the new year in terms of the elevated insolvency risk levels facing businesses in its key industry sectors.
New research by insolvency and restructuring trade body R3 has found that eight of the 11 North East industries that the organisation monitors are performing better than or the same as the national average for raised insolvency risk in their respective sectors.
But the research also showed the proportion of companies facing a higher than normal insolvency risk rose in seven of these sectors between December and January, including in the region’s manufacturing, retail and construction sectors.
The biggest rises, of over three percent, came in the hotel and pub sectors, while recent bad news for the North East retail sector was reflected in the 2.5 per cent rise in its rate of insolvency risk.
Despite its month-on-month rise, the North East pub sector remains in the best position of any of its UK peers in terms of the proportion of companies at above-average insolvency risk.
The region’s agriculture industry is still in second place in its list, while the restaurant and technology/IT are both in third place in theirs.
On the downside, the North East professional services sector showed the highest proportion of firms with a raised risk of insolvency (49.5%) of anywhere in the UK this month.
The overall proportion of all North East firms with an elevated insolvency risk, 40.1%, is just under one percentage point lower than the 41% figure for the UK as a whole.
R3’s insolvency risk tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balance 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: “The start of any new year is often challenging for businesses in many different industry sectors, with consumers feeling the cost of Christmas just gone and clients not quite ready to start spending on new projects as quickly as their suppliers might like.
“It’s a time when management teams must be extra vigilant about the state of their company finances and should be ready to look for qualified help and advice if any issues arise.
“It’s encouraging to see the likes of the North East construction, technology and agriculture sectors performing well in comparison with their peers round the country, while even with the month-on-month rises in risk in the hotel and pub sectors, our hospitality industries continue to maintain their usual impressive positions in their respective sectoral lists.
“The acknowledged difficulties facing retailers everywhere continue to be reflected in our research, while seeing half of the region’s professional services firms face a raised insolvency risk is an obvious concern when these businesses have such a significant impact on the performance and progression of every type of business.”