Fifteen per cent more businesses in Stoke-on-Trent are in ‘significant financial distress’ compared to the same period last year.
According to Red Flag Alert data from insolvency firm Begbies Traynor, a total of 1,681 businesses in the city found themselves in financial distress between April and June – representing a six per cent increase in the number of businesses struggling between Q1 and Q2 2020 and up 15 per cent on the same period in 2019.
But the firm believes that the true number could actually be much higher due the lack of court activity during the coronavirus pandemic which substantially reduced the amount of legal action being taken against indebted companies.
Diane Dunion, partner at Begbies Traynor in Stoke-on-Trent, said: “These are undoubtedly the toughest of times for all businesses. While the latest figures from our Red Flag Alert show that there has been a relatively small increase in the number of ailing companies here in Stoke-on-Trent over the past quarter, the true picture of financial distress may be concealed by inaction on insolvent and distressed businesses in the courts. This means we are more likely to see the real impact of the pandemic during the second half of 2020.”
In the Potteries, sectors which faced greater financial difficulty than others include retail and health and education – with the number in distress increasing 13 per cent and 10 per cent respectively between Q1 and Q2.
And even though some sectors showed some signs of relative stability – including real estate and property and construction, which recorded slight increases since Q1 – many businesses will be bracing themselves for further slowdown in Q3.
Diane added: “There have been unprecedented company support measures from the Treasury during the pandemic, with both the furlough scheme and access to government backed funding schemes. But unfortunately, as the chancellor himself has admitted, not all businesses and jobs can be saved.
“While it is likely that this situation will get worse for many businesses before it gets better, those businesses that have the capital and the management ability will be better placed to adapt to the ‘new normal’.
“Even before the crisis hit, change had been coming, but the pandemic has increased the pace of this change. We have already seen some businesses make significant alterations to their structures and we’ll expect to see more in the coming months.
“But a crisis can be an opportunity – we’re in for hard times, but if this is a catalyst for change it could result in a better, more sustainable future.”
The statistics – which monitor the financial health of UK companies – show that nationally, a record 527,000 businesses are in significant financial distress which is a rise of 33,000 since the beginning of the year.