Insolvency risk rises in West Midlands
West Midlands businesses are now at greater risk of insolvency than at the start of 2017, according to new research by the Midlands branch of restructuring and insolvency trade body R3.
July’s figures, compiled using Bureau Van Dijk’s Fame database, show that over one in four businesses in the region – 26.1 per cent – are now at higher than normal risk of insolvency. This is equivalent to over 71,000 companies and contrasts with January’s figure, which was almost three points lower at 23.6 per cent.
The R3 Midlands research also highlights that transport/haulage and technology/IT continue to be among the highest risk sectors in the West Midlands, with over a third – 34.5 per cent and 33.7 per cent respectively – of businesses at above average risk of insolvency.
Over the past month, sectors showing the greatest increase in companies with an elevated risk of insolvency include manufacturing, construction and agriculture, while declining risk scores are evident among pubs, restaurants and tourism operators.
R3 Midlands Chairman Chris Radford, a partner at Gateley plc in Birmingham, said: “Having been flat last year and having fallen slowly from a post-financial crisis peak before that, corporate insolvency numbers are starting to move up again.
“Low interest rates and creditor forbearance have helped keep corporate insolvency volumes relatively low during 2017, but the economic challenges have definitely started to increase in recent months and are putting even more pressure on vulnerable businesses.
“The hurdles are likely to get higher going forward as companies deal with the instability surrounding Brexit, the introduction of the National Living Wage, the rollout of pension auto-enrolment to smaller businesses and a likely increase in interest rates.
“While it is good to see many tourism and hospitality companies able to capitalise on their seasonal increase in demand, there are still tens of thousands of businesses across the region walking a very tight financial line.
“Business owners should monitor their finances carefully and plan for all eventualities. It is vital to remain alert to signs of trouble and be ready to adapt to the changing economic landscape.”
