THE North East has seen a sharp growth in the number of companies facing critical problems while the South is recovering, says a new study.
And it is the region’s small firms which are suffering the worst with more “zombie businesses” fighting off collapse, according to the Begbies Traynor Red Flag Alert research published today.
Levels of critical business distress in the North East have been 38.5% higher during the first three quarters of 2012 than the same period last year, with a monthly average this year of 59 companies showing signs of serious problems.
The survey of signs such as county court judgements and winding-up petitions rose by 9% in the North while among firms based in the South there was a 7% drop.
The report also showed that among North East SMEs there was a 16% increase in significant distress quarter on quarter compared with larger companies which showed a 51% decrease. Begbies said this reflects the growing impact of “zombie businesses” – companies in debt and only just making sufficient cash to survive – and the choking effect they are having on the natural UK recovery cycle.
Andy Haslam, partner in the firm’s Newcastle office said: “It is evident that larger businesses are exploiting their scale by enforcing lengthier payment terms on SMEs.”
Construction continues to be one of the sectors hardest hit by “significant” problems with a 43% increase in the total instances of distress in Q3, and hotels and accommodation with a 42% rise quarter on quarter.