Saturday, May 28, 2022

Business distress figures could be ‘calm before the storm’ – claim

Signs that business distress may have stabilised in the first three months of this year are likely to be dramatically reversed as the global economy starts to feel the devastating impact of the war in Ukraine and soaring energy prices.

Begbies Traynor’s latest data reveals a 22% drop in ‘significant’ or early-stage distress in Lincolnshire, compared to the first quarter of last year when the country was in lockdown, and a 4% fall compared to the final quarter of 2021. Across the UK as a whole, significant distress fell by 20% year on year and 1% since the previous quarter.

Gareth Rusling, who heads Begbies Traynor’s Lincolnshire offices in Lincoln, Scunthorpe and Grimsby, said: “While at first glance these latest business distress figures seem to paint a relatively optimistic picture, of businesses in Lincolnshire, and the whole of the UK, beginning to emerge from the enormous challenges of the past two years, unfortunately they do not take into account the two most recent global developments that are already beginning to shake the economy to its core.

“The gathering storm of the war in Ukraine, and the sharp rise in energy prices and escalating cost of living crisis which the conflict is set to exacerbate, will inevitably put enormous strain on business across almost every sector.

“For small-business owner-managers in particular, it’s now essential to be as structurally and financially well prepared as possible. Seeking advice at the first signs of financial distress is also a wise move and means that more options are available to take positive action.”

In Lincolnshire the decline in business distress was seen across the whole economy in the first three months of 2022 compared with Q1 2021. Printing and packaging saw a 30% year-on-year fall, food and drug retail sector distress fell by 27%, while in Lincolnshire’s automotive sector, distress dropped by 27%.

In Q1 of 2022, compared to the final three months of 2021, distress continued to fall gradually across the regional economy, with only construction and general retail  (both up 1%) and health and education (up 3%) seeing a slight increase in financial difficulties.

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