The proportion of North East firms with a raised risk of insolvency has remained steady through the first half of 2019, according to insolvency and restructuring trade body R3’s latest research.
While the overall number of active businesses across the region rose by 1.3% between January and June, from nearly 82,800 to just under 83,900, the proportion with a higher than normal risk of entering insolvency in the next 12 months was flat, going up by only a tenth of a percentage point (from 41.7% to 41.8%).
The proportion of North East firms with a raised risk of insolvency fell or stayed flat in the first half of the year in seven of the 11 industry sectors that R3 monitors, while it rose in four.
The agriculture industry saw the biggest drop in elevated risk levels over the first six months of the year, falling by almost three percentage points, while the hotel sector’s 1.2 percentage point rise was the largest of the sectors monitored, although it was still the fourth best performing sector of its peers around the UK in June.
Despite the well-known problems on the UK’s high streets, the regional retail sector saw a 0.6 percentage point fall between January and June in the proportion of firms with a raised risk of insolvency, but the North East manufacturing industry returned a 0.4 percentage point rise for the same period.
The overall proportion of all North East companies with an elevated insolvency risk is lower than the 42.6% figure for the UK as a whole, a number which has itself fallen by 0.2 percentage points since January.
North East companies are currently performing better than the national averages for their respective industries in six of the sectors that R3 monitors, with the region’s pub and restaurant sectors continuing to have the lowest proportion of companies at higher than normal insolvency risk of any region in the UK.
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: “It’s been a real mixed bag for the regional economy over the first half of the year, but overall, North East businesses appear to have remained pretty robust in the face of continuing challenges and wide-ranging uncertainty.
“Our hospitality industries have maintained their usual strong position in comparison with peers around the country, while despite the widespread doom and gloom on the high street, our retail sector has managed to slightly improve its position.
“With the second half of the year looking likely to offer little more certainty than the first, it’s as crucial as ever for business owners and managers to stay on top of their finances and to take proactive steps to address any emerging financial issues as soon as they become apparent, so they have the best possible chance of addressing and moving on from them.”