Leap in Shropshire business distress

Latest data from corporate recovery firm Begbies Traynor shows that 1,587 businesses in the county are in "significant" distress, based on a complex series of measures established by the firm.

That reflects a 13 per cent increase on the first quarter of the year, and a rise of seven per cent in comparison to the same period in 2014.

Far fewer businesses find themselves facing a "critical" level of financial problems, but the number to have done so has also increased, with 16 businesses in the county on the cusp of serious financial trouble.

Begbies' regional managing partner John Kelly said that in many cases, problems had been caused by a race to cut prices among food and drink retailers.

In Shropshire, 24 food a drug retailers are in significant distress, four more than in the first quarter but fewer than this time last year, and 15 food and drink manufacturers are struggling.

"During the first six months of 2015 we've witnessed a real shift in approach amongst the big four supermarkets in terms of their response to the rising popularity of the German discount food retailers," said Mr Kelly.

"Only recently we learned that the Competition and Markets Authority is looking into complaints by Which? that supermarkets are using ever more complex marketing tactics to present customers with a bargain. This is clearly a response to the bargain offer presented by discount stores.

"However, this approach is really squeezing suppliers, many of which are SMEs, and small retailers who simply cannot compete on price. Faced with increasing overheads, late payments and now the threat of an interest rate rise towards the end of the year, many of these companies will find it impossible to carry on."

Bars and restaurants in Shropshire are also facing increasing problems, with 84 considered to be in significant distress, while the biggest jump was among telecommunications companies, where 34 per cent more are now in trouble than in the first quarter – or 71 businesses.

The recovery in the construction industry is borne out by the results, with a three per cent fall in the number of companies in distress, although that still leaves 162 business owners furrowing their brows. Businesses in the financial services and hotels sectors are the others to have seen a fall in distress.