Latest data from Begbies Traynor shows a 40% year-on-year rise in Liverpool city region firms in ‘significant financial distress’ in third quarter of 2024 – but the rise is slowing. Tony McDonough reports

Firms in the construction sector are seeing the worst distress levels. Stock image

There were 6,973 firms in Liverpool city region in “significant financial distress” in the third quarter of 2024, new data show.

Insolvency experts at Begbies Traynor have released its latest quarterly survey covering July, August and September. The number of Merseyside firms in significant distress was 40% higher than the same period in 2023.

However, it was just 4% higher than the second quarter of 2024, suggesting the rise in distress may be slowing. Worst-affected sectors were construction (1,121 firms in distress), property (878), support services (1,081) and professional services (478).

Significant financial distress refers to businesses showing deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.

Begbies says distress levels jumped in 14 of the 22 sectors analysed in Merseyside over the last quarter with the largest leaps seen in utilities (60%), travel and tourism (33%) and food and drug retail (25%). Nationally, 632,756 companies are now in significant distress.

Stephen Berry, partner at Begbies Traynor in Liverpool, said: “With almost 7,000 firms in our region operating in significant financial distress, no sector is immune to the wide range of challenging scenarios businesses continue to face.

“The effects of inflation on raw materials and labour costs are still having a disastrous impact on many firms, particularly in the construction sector, where we have recently seen high profile administrations.

“There are certain to send a shockwave through subcontractors of all kinds. In speaking to many business owners operating in the sector it’s clear there are major concerns.”

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His Liverpool colleague Jason Greenhalgh added that a factor in increasing distress levels is the “sheer level of uncertainty that businesses” in the UK face due to factors largely outside of their control.

He explained: “The long-anticipated Budget at the end of this month is widely expected to include a range of tax measures, particularly employee related taxes, meaning that businesses already on the brink could be presented with a fatal blow or at least require a significant restructuring of their operations.”