First quarter figures show financial distress among Lancashire companies

A worrying 19 out of the 22 key business sectors in Lancashire saw an increase in levels of financial distress in the first quarter of 2020, a new report says.

Friday, 24th April 2020, 6:45 am
Updated Friday, 24th April 2020, 7:00 am

Some 8,999 county firms ended Q1 in significant financial distress, a rise of three per cent on the previous quarter according to the latest Red Flag Alert report by Begbies Traynor in Preston.

Worryingly, the figures do not take into account the negative effect the current lockdown measures are likely to have. Utilities saw the biggest percentage quarterly increase of 15 per cent while the Industrial Transportation sector saw an increase of 11 per cent. Construction (1,322), real estate and property (961) and support services (1,233) make up the largest volumes of distressed firms.

The year-on-year comparison was even bleaker than the quarterly comparison with a 6% increase in the number of Lancashire firms experiencing significant financial distress compared to the same time last year.

Sign up to our daily newsletter

The i newsletter cut through the noise

Ian McCulloch from Begbies Traynor

More than half a million firms in the UK are now operating under financial distress, according to the research.

Ian McCulloch, partner at Begbies Traynor in Preston, said: “These figures make grim reading and offer more insight into the shape of things to come for many businesses in our region. Even without accounting for the full economic impact of current government-enforced lockdown measures they are troubling.

“Many of these companies were teetering on the brink of collapse before COVID-19 challenges presented themselves. Wide-scale business disruption owing to government-enforced closures coupled with restrictions on social movement has seen consumer demand fall to unprecedented lows.

“Unfortunately it is not unreasonable to conclude that thousands of these already distressed companies – along with a significant number of previously thriving businesses now likely to find themselves in a perilous position following several months of severely dampened trade – will simply be unable to survive without major restructuring of their operations and financial arrangements.

“What business owners need to remember is that the challenges they are currently facing do not have to signal the end for their company. There are a range of business rescue and recovery strategies which can be utilised in these situations which can help stem the flow of loss and stabilise the business for the future.

“Whether this is by restructuring its existing liabilities or else through a streamlining process to divest the company of non-performing or unprofitable arms, there are solutions out there.