Thousands of Cornish companies are now classed as being in “significant” economic distress, according to the latest figures from Begbies Traynor’s ‘Red Flag Alert’, which monitors the financial health of UK companies.
Rising interest rates, debt, subdued consumer confidence, high energy costs, and wider economic uncertainty are putting considerable financial pressure on businesses across the region, with 1,661 at risk of economic failure. This represents a quarterly increase of 23.8%, and an annual rise of 19.8%.
The figures also highlighted particular sector hotspots, with the professional services and health & education sectors seeing annual increases of 69.7% and 61.8% respectively in the number of companies in significant financial distress.
Nationally, the latest Red Flag Alert research for Q3 2023 recorded 478,176 businesses in significant distress, up 8.7% on the prior quarter, with almost 40,000 classed as being in ‘critical financial distress’. The sectors driving the quarterly increase in critical distress were construction, real estate & property and support services, up 46%, 38% and 28% respectively.
Commenting on the figures, Scott Kippax, partner at Begbies Traynor in Cornwall, said: “This latest data highlights how the debt storm, which has been brewing for years, but had been held off by several measures to provide breathing space for companies, is likely to break. Businesses that had loaded up on debt at rock-bottom rates and were only able to cling on during the pandemic thanks to Government support, must now deal with a financial reality check as higher interest rates hit working capital for the foreseeable future.
“Taken together with stubbornly high inflation and weak consumer confidence, many of these businesses will inevitably head towards failure. While stabilising inflation and interest rates could start to slow the rising levels of distress in the economy, history dictates that this will take some time and insolvencies often peak long after a recovery has started. Unfortunately for many businesses, time is not on their side.”