More than 13,000 West Midlands firms in 'significant' distress

More than 13,200 businesses across the West Midlands found themselves in ‘significant’ financial distress during the first quarter of this year.

But there are some signs of hope, with the number of firms in trouble overall falling.

Figures from insolvency practitioners Begbies Traynor’s Red Flag Alert, which monitors the financial health of British companies, showed there was a one per cent decrease in the number of businesses in the region struggling between the final quarter of 2021 and the January to March period.

The total was also a 21 per cent fall on the same three months in 2021. There were some differences across the region, with some areas experiences a rise in the number of companies facing financial difficulties.

Wolverhampton saw the biggest growth in business in distress over the quarter, reporting a two per cent increase to 1,657, while Stafford registered a one per cent rise to 768. Birmingham (9,018), Dudley (542) and Walsall (1,309) all saw quarterly falls, experiencing two, four and one per cent drops respectively.

The sector picture for the West Midlands reveals the particular difficulties faced by the region’s construction sector, with the number of businesses in distress up nine per cent in both Wolverhampton and Dudley and five per cent in Walsall compared to the third quarter of 2021. Birmingham saw a six per cent increase in the number of professional services companies in distress.while in Stafford the manufacturing sector saw the biggest increase in distress – up three per cent.

Nationally, the latest Red Flag Alert research recorded 581,596 businesses in significant distress, which is flat on the previous quarter. However, the figures also showed a marked increase in the numbers of businesses deemed to be in ‘critical’ distress, with a 19 per cent year-on-year increase driven by a 51 per ent jump in the construction sector and a 42 per cent rise among bars and restaurants.

There are also concerns about a steep increase in County Court judgements as data revealed there were 11,673 rulings in March, up 179 per cent on the monthly average for the previous two years, and the highest level in a single month in five years.

Mark Malone, partner at Begbies Traynor in West Midlands, said: “While the year-on-year data of companies in the West Midlands in significant distress may be encouraging, the critical distress and CCJ numbers highlight troubles building up in the system. For the first time in more than decade, inflation is the prime concern for businesses as companies struggle under rising costs.

“However, having ploughed so much money into protecting businesses over the past two years, the Government won’t want to see it wasted as companies collapse, unable to repay their debts. Taking a hard line on repaying pandemic funding and other loans would likely drive many businesses over the edge, which no-one wants to see as the economy struggles to recover.

“As such, there needs to be a long-term view. For example, we could see support for businesses through leniency in repaying pandemic funding, or an approach like war bonds, with terms being extended as ministers follow the adage that a rolling loan gathers no loss.

“However, any businesses facing financial difficulties, for whatever reason, should seek professional advice in order to fully understand the options available.”

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