Ulster companies face cash crunch despite rebound
The number of Northern Ireland companies in "critical financial distress" is still rising despite a healthier picture across the rest of the UK, according to new data.
Business rescue specialist Begbies Traynor said 50 firms here suffered from critical problems in the second quarter of the year, up from 48 in the first quarter.
That compares to a decrease in the numbers for the rest of the UK and dampens the bullish economic news emerging from recent economic indicators.
Consumer sectors have struggled most with dwindling disposable incomes as a result of a combination of relatively high inflation and static wages.
"The consumer-facing industries continue to struggle as shoppers maintain tight control over their purse strings at a time when disposable incomes has remained under pressure," Joan Houston, who heads up Begbies Traynor in Belfast, said.
There was a 39% rise in the number of hotels facing critical financial distress in the second quarter, a 27% rise in the bar and restaurant trade and a 7% rise in general retail businesses.
But Ms Houston said we should not lose heart.
She pointed out that there has a been a 39% fall in the number of businesses in the leisure sector in critical financial distress in the second quarter, a 29% fall in both the financial services and sports and recreation sectors and a 27% fall in the travel and tourism sector.
But there is a chance small and medium-sized enterprises will have serious financial difficulties at the time they least expect it -- during a recovery.
Ms Houston said: "Our experience has shown time and again that many SMEs run out of cash during a recovery phase as there's a real temptation to overtrade.
"Many of these companies at risk have been labelled as 'zombies' in the past but, with the majority having survived the worst of the recession, they are now chronically under-funded; benefiting from low interest rates and improving confidence in desperate need of finance and, crucially, guidance to help them take advantage of the dawning economic recover in an unfamiliar, post-crisis market."