Insolvency risk remains major threat in West Midlands
The number of active businesses across the West Midlands increased during 2018, but was heavily outweighed by the rise in the proportion of local companies facing an elevated risk of insolvency.
This is according to the Midlands branch of insolvency and restructuring trade body R3, whose latest research shows a net increase of over 2,800 active West Midlands companies in the past 12 months, with the total figure rising from over 278,000 in January 2018 to more 281,000 this January.
However, the overall number of West Midlands firms with an increased risk of insolvency grew by 21,900 over the same time period. The proportion of West Midlands companies at elevated risk of insolvency grew from 34 per cent in January 2018 to 41.4 per cent last month, a rise of more than seven percentage points.
The R3 Midlands report, which is compiled using Bureau van Dijk’s ‘Fame’ database, also looked at elevated insolvency risk for 11 key industries in the region.
January 2019 figures show that the region’s manufacturing sector is currently one of the most stable compared with other parts of the UK, with 35.9 per cent of companies at an increased insolvency risk - almost two percentage points below the UK average of 37.7 per cent. The sector is outperformed only by London, Northern Ireland and the North West.
Also operating with an elevated insolvency risk below the UK average, albeit by less than a percentage point, are West Midlands pubs and construction businesses.
The remaining sectors – agriculture, tourism, restaurants, hotels, professional services, IT and tech, transport and haulage, and retail – all have proportions of businesses with an increased risk of insolvency which is above the UK average.
R3 Midlands chairman Chris Radford, a partner at Gateley in Birmingham, said: “The figures show that many entrepreneurs are treading a very fine line between adopting a cautious strategy and going for growth.
“Unfortunately, trading conditions are far from ideal, despite the fact that Birmingham’s economy has grown strongly in recent years after decades of underperformance. With economic recovery still very much in the balance, careful management of cash flow is imperative for businesses of all sizes and ages.
“Key to business survival is to take relevant professional advice at the first sign of significant financial difficulties. When R3’s members are called in to help early enough, much can be done to rescue and support businesses beyond traditional insolvency solutions.”