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Northern Ireland firms with money issues up 28% and problem may get worse once Covid-19 support measures are withdrawn, warns specialist


Lawrence O'Hara

Lawrence O'Hara

Lawrence O'Hara

Up to 10,000 firms in Northern Ireland are facing worsening financial problems with the leisure and automotive sectors worst hit, a report said today.

Insolvency specialist Begbies Traynor, which carried out the research, warned the reality for many businesses could be even worse as government support schemes were propping up many ailing firms.

Begbies Traynor said that the numbers of businesses here showing “significant” signs of distress was up 28% in the second quarter of this year, compared to the same period last year.

That was steeper than in the UK was a whole, where signs of significant distress had climbed by 24%.

The firm said the significant problems were affecting 10,000 firms across the region, and matters were getting worse in all 22 sectors of the economy.

But it said things were particularly bad for the automotive sector — covering car-part manufacturers — and the financial services industry. Both sectors displayed 45% growth in signs of distress.

In the leisure and culture sector, where Covid-19 restrictions have been more prolonged than for other parts of the economy, signs of distress were up 39%.

Firms are regarded as experiencing significant distress if they have had County Court Judgments of less than £5,000 filed against them, or where they have shown deterioration in things like working capital, retained profits and net worth.

But while signs of significant problems were up 28% year on year, they had fallen by 15% on the first quarter of the year.

Lawrence O’Hara, who leads Begbies Traynor in Northern Ireland, said: “It is not only concerning to see rising levels of early signs of distress compared with last year, but we are also worried that the true extent of financial problems being stored up by businesses here and across the rest of the UK is actually much worse than the figures indicate.

"The flood of insolvencies widely predicted post-pandemic has not come to pass with relatively low numbers of businesses failing in the first six months of 2021.

"However, the Government has extended its Covid support measures and these, together with a supportive lending environment, have helped firms to trade through the pandemic and masked underlying distress.”

Companies have benefited from support like cheap bank lending through government-bank loan schemes as the Coronavirus Business Interruption Loan Scheme, and the Bounce Bank Loan Scheme.

Northern Irish businesses have borrowed more than £2bn under CBILs and the BBLS.

And according to the latest figures from HMRC, there were 58,600 people in Northern Ireland being supported by the Coronavirus Job Retention Scheme (CJRS) at the end of May.

However, that scheme ends in two months.

Hospitality firms are also facing an increase in Vat from 5% to 12.5% in September.

Mr O’Hara said: “With the prospect of the CJRS among others starting to be wound down in the autumn, the real scale of distress after 18 months of lockdowns and disruption will soon be revealed.

"As businesses struggle to cope with the impact of the pandemic along with Brexit, it is vital that directors proceed with caution and enlist professional advice to help navigate through this extremely difficult trading environment.”

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