Insolvency risk levels plateau for North East firms

Insolvency risk levels for North Eastern retailers plateaued throughout the third quarter, providing firms with a glimmer of hope ahead of the Christmas trading period.

The latest figures from insolvency and restructuring trade body R3 reveal that the proportion of firms deemed to be at above average risk of insolvency climbed by just 1% between July and September.

However, 41% of retailers in the region are deemed to have excessive risk levels, which highlights the ongoing difficulties faced by the sector.

As well as the retail sector in the North East, the professional services sector also has a proportion of companies at risk of insolvency that is above the national average for the UK.

R3’s North East chair, Andrew Haslam, welcomed the latest news and described the final quarter as “the most important and potentially lucrative” for retailers.

He added that while several high profile closures have dented confidence, a marginal increase in the number of active businesses is positive news for the region.

The Confederation of British Industry has also reported that retail sales dropped at a much faster rate than anticipated in October, which will concern businesses.

R3’s vice president Duncan Swift pointed to negative consumer confidence, high levels of personal debt, pressure on wages and interest rate increases as being factors behind a 19.3% rise in corporate insolvencies throughout the third quarter.

The figures from the Insolvency Service reveal the precarious position of the retail sector, although the period surrounding Black Friday and then the run up to Christmas may boost sales.

In part, the increase in corporate insolvency was driven by a greater number of creditor voluntary liquidations whereby shareholders were opting to close down businesses as they were unable to find ways of fully repaying creditors.

By Phil Smith

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