Further gloom for Teesside businesses

May 20 2008 By Jez Davison

TEESSIDE’s financial experts have predicted further gloom for local businesses, as new research revealed a sharp rise in the number of companies in crisis.

According to Begbies Traynor’s Red Flag Alert Statistics, in the first four months of the year 506 North East companies suffered from "critical problems" - more than five times the number in the same period last year - as the credit crunch and rising commodity prices begin to take their toll.

Other regions suffered even bigger increases with 681 companies hit by critical problems in the North West and North Wales - up from 121 in the first four months of 2007 - while the number of firms affected in the South-east rose from 387 to 2,301.

Andrew Priestley, a stockbroker for Middlesbrough-based Redmayne-Bentley, said he believed the country was moving from "a crisis of liquidity to a crisis of solvency" as companies were hit by reduced availability of credit and rising commodity prices.

He said: "Companies looking to borrow to finance their business are finding it more difficult."

He added that company finance directors were going into "cash conservation mode" and would only spend on essentials.

Companies with "critical problems" are defined as those with County Court Judgements (CCJs) totalling £5,000 or more and/or winding-up petition related actions.

Despite the gloomy prognosis, manufacturing accounts for only 6% of the number of UK companies suffering from critical problems.

Tony Sarginson, new regional policy executive at EEF Northern said manufacturers’ ability to secure long-term contracts was cushioning them from the worst effects of the credit crunch.

He said: "The boom in oil and gas, petrochemicals, automotive, defence and infrastructure projects has led to longer supply chain contracts, which has spread the risk".