Sharp jump in Shropshire companies in financial distress

The county saw a 17 per cent increase in companies in "significant" trouble in the quarter to the end of June, with 1,988 businesses struggling to make ends meet in the second quarter of the year, according to the figures from business recovery firm Begbies Traynor.

Almost all areas of industry have seen an increase in the number of companies to have been in difficulty over the period, with bars and restaurants, estate agents, and sport and health businesses among the hardest hit in Shropshire, with year-on-year rises in the number of business affected of 38, 43 and 48 per cent respectively.

Construction saw a 21 per cent rise in the number of business affected, with 241 businesses in the sector in Shropshire reporting distress.

Despite the increase, the county has been less badly affected than both the wider West Midlands and the country as a whole.

Nationally, 329,834 firms reported significant financial distress in the second quarter – a rise of 25 per cent on the same period last year and the highest quarter-on-quarter increase for three years.

In the Midlands, 40,235 firms faced significant distress, 22 per cent up on the same period last year.

Gareth Prince, director at Begbies Traynor's Birmingham office, said: “The rising levels of distress in the property and construction sectors indicate that these sectors are lacking strong foundations as they face headwinds from Brexit, the rising cost of imported goods and skills shortages which will drive further wage pressures.

“In the UK’s consumer facing industries, weak real wage growth and rising levels of personal debt continue to put a strain on the retail, bars, restaurants and leisure sectors, where many businesses have been reluctant to fully pass on the inflationary impact of the weakened pound and higher staff costs from the National Living Wage, for fear of losing customers on price in an increasingly competitive marketplace.

“As we enter the second half of 2017, it is worrying that so many businesses and particularly SMEs are facing such high levels of financial distress.

"These businesses are the backbone of our economy which may need to rely on a stronger than ever SME community to fuel its growth following Brexit, yet these figures indicate that many will struggle to fund increases in working capital and invest in growth.”

The figures are calculated using Begbies Traynor's scoring system, which assesses deterioration in companies' credit risk, and county court judgements worth less than £5,000.