The number of firms in Northern Ireland on the brink of collapse jumped by nearly 40 per cent at the end of 2023 as fears grow over a “debt storm” caused by the recent barrage of interest rate hikes,.
The latest Red Flag Alert report from insolvency specialist Begbies Traynor found that 747 local businesses were in critical financial distress in the final three months of last year.
And the worst-hit sectors were utilities, with a quarter-on-quarter rise in critical distress of 300%, followed by food and drug retailers (up 180%), transport and logistics (up 129%), professional services (up 108%), and leisure and cultural activities (up 56%).
Only two sectors in Northern Ireland saw critical distress fall since the previous quarter – financial services fell by 25%; and wholesale by 12%.
The less advanced ‘significant’ distress also saw a rise in Northern Ireland, increasing by 20.5% quarter-on-quarter; and by 7.1% compared with the same period in 2022.
More than 9,000 businesses in Northern Ireland suffered from significant distress in the final three months of 2023.
Lawrence O’Hara, who leads Begbies Traynor in Northern Ireland, said: “While the economic picture across the UK is far from rosy, it is extremely worrying to see Northern Ireland experiencing one of the sharpest increases in advanced critical distress since the previous quarter.
“Having taken on debt when interest rates were low, growing numbers of businesses are now paying the price.
“With the cost of living crisis impacting consumer spending and continuing high inflation, businesses within Northern Ireland are struggling to regain stability and, unfortunately, many of these businesses may now be on the road to insolvency.
“It is imperative that these businesses should seek professional advice as soon as they can, to avoid financial problems from escalating.”
In the UK as a whole, 47,477 firms were in critical financial distress in the final three months of last year - up 25.9% on the previous three months.
Begbies also said that 539,900 UK businesses were deemed to be in “significant” financial distress in the quarter, up 12.9% on the previous three months and 5.6% higher year on year.
Julie Palmer, a partner at Begbies Traynor, said: “Now that the era of cheap money is firmly a thing of the past, hundreds of thousands of businesses, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances.”
She added: “For some, a better-than-expected Christmas may kick these concerns down the road for a little longer, but the rapid growth in the levels of critical financial distress point to an economy that is waking up to the danger of debt ladened businesses in a higher rates environment.
“Sadly, for tens of thousands of businesses who should be looking ahead to 2024 with some degree of optimism, the new year will bring a fight for survival as the debt storm that has been brewing for years looks like it is breaking across the country.”
