The number of businesses in Northern Ireland facing financial difficulties increased sharply in the third quarter of 2024, new analysis suggests.
The latest market data from the Red Flag Alert business monitor indicates a 32.7% increase in the number of firms in early or ‘significant’ financial distress, compared with the same period last year.
The category denotes firms experiencing a deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.
Insolvency specialist Begbies Traynor said almost 10,000 firms in the north are in the category, reflecting a broader UK-wide trend.
However, the same data found that Northern Ireland businesses in a ‘critical’ state financial distress did fall by 23.2% between the second and third quarters of the year.
Begbies Traynor said 569 companies in the north were still in the category last quarter, which was 5.8% up on the third quarter of 2023.
Of the Northern Ireland companies entering ‘significant’ distress in between the second and third quarters of 2024, the data found the biggest increase was in the in the travel and tourism sector (+70.6%).
Other sectors recording quarterly increases included: hotels and accommodation (+17.5%); telecoms (+16.6%); wholesale (+14.7%); and professional services (+12.6%) sectors.
There were some improvements in the automotive (-6.8%) and construction (-4.2%) sectors.
“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,” said Lawrence O’Hara, who leads Begbies Traynor in Northern Ireland.
“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.”
The restructuring expert added: “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.”