With economic challenges continuing to weigh heavily on businesses in Northern Ireland and across the UK, the region experienced a hike in early signs of financial distress which rose by almost a third in Q3 2024 compared with the same period the previous year, according to the latest Red Flag Alert data from leading independent business rescue and recovery specialist Begbies Traynor, a report that seems at odds with a series of recent assessments of economic health here.
Providing a snapshot of British corporate health, the new research shows that in the third quarter of this year, 32.7% more businesses in Northern Ireland were affected by early or ‘significant’ financial distress compared with Q3 2023. This type of distress (which refers to deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth) impacted 9,985 businesses in the province. Northern Ireland also saw a rise in early-stage distress since the previous quarter with an increase of just 2.4%.
The UK-wide figures reflected these trends with a 32.3% increase in ‘significant’ distress since Q3 2023, and a 5.1% increase since the last quarter. Across the UK, 632,756 businesses experienced ‘significant’ distress in Q3 2024.
Looking at levels of the more advanced ‘critical’ financial distress, Northern Ireland experienced a quarter-on-quarter drop of 23.2%, representing 569 companies, the same as the national decrease, with 31,201 companies affected across the UK. There was a 5.8% rise in firms suffering from advanced distress in the province compared with the same period the previous year, significantly different to the UK-wide decrease of 17.3%.
The uplift in companies in Northern Ireland showing ‘significant’ financial distress in Q3 2024 compared with the previous quarter was driven by marked increases in distress in the travel and tourism (+70.6%), hotels and accommodation (+17.5%), telecoms (+16.6%), wholesale (+14.7%), and professional services (+12.6%) sectors. However, five sectors in the province saw a fall in early distress since the previous quarter: automotive (-6.8%), construction (-4.2%), printing and packaging (-2.6%), and bars and restaurants and real estate and property (both -2.5%).
Lawrence O’Hara, who leads Begbies Traynor in Northern Ireland, said: “The perfect storm of Brexit, swiftly followed by the pandemic, left many businesses fighting for survival and the added pressures of sticky inflation, resulting in escalating costs and falling consumer spending, are continuing to impact every sector.
“After some initial optimism following the general election, 2024 is proving to be another tough year for UK firms. It is extremely worrying to see almost a third more businesses in Northern Ireland now on the brink of failure compared with the same quarter last year. As almost 10,000 companies in the province balance on the knife edge of insolvency, the UK economy is desperately in need of a period of certainty in which businesses can consolidate and plan for future growth.”
Mr O’Hara continues: “While the impending Budget is being viewed with trepidation by many, it is hoped that a more secure financial landscape lies ahead. Nevertheless, given the high levels of debt that businesses have accumulated in recent years, business owners and managers would be wise to remain cautious and turn to professional advisers at the first signs of financial problems when the most tools will be available to prevent problems from escalating.”