Wiltshire’s buoyant firms are helping the county weather the chilly economic climate better than the UK as a whole, according to new research.
But the recent VAT increase, higher fuel bills and impact of the public spending cuts could still combine to leave businesses facing a tough few months.
The number of ‘financially distressed’ businesses in Wiltshire fell by three per cent to 1,654 in the final three months of last year compared with the same period in 2009.
This was in contrast to the UK as a whole, which suffered a four per cent increase over the same period – the first year-on-year rise for seven quarters.
The figures emerge from economic data compiled by business rescue and recovery specialist Begbies Traynor for its Red Flag Alert report.
It classifies businesses as being distressed if they have county court or winding-up-related action pending against them, are insolvent or have out-of-date accounts.
The research shows the sectors struggling most in Wiltshire were business-to-business services such as management holding companies, office machinery maintenance and security-related businesses, which accounted for 17 per cent of the county’s distressed firms, and the construction sector, which made up 15 per cent.
Begbies Traynor partner Julie Palmer said: “The year-on-year comparison for Wiltshire is extremely encouraging and shows how, by looking at the bigger picture, we appear to still be on the long and winding road to recovery.
“That said, we are entering a period of considerable uncertainty. We have just seen the largest decline in house prices for a year, an accelerated decline in business confidence and a forecast of higher unemployment this year, posing a number of renewed challenges for Wiltshire businesses, and in particular SMEs, for the year ahead.”
An early indication of this could be seen from the sharp increase between the third-quarter and fourth-quarter figures for 2010 in Wiltshire which revealed an 11 per cent increase in distressed companies.
“While the figure itself isn’t enough to start alarm bells ringing, it is perhaps reflective of the impact of the Government’s Comprehensive Spending Review’s and is enough to justify the nervousness among businesses that indicators are suggesting,” added Julie.
Begbies Traynor executive chairman Ric Traynor said: “For smaller businesses, we are entering the darkest hour before the dawn as they face the dual challenges of weak domestic demand and greater pressures from larger competitors and business customers looking to preserve their own profitability. As such, it will be smaller businesses that bear the brunt of an increase in formal insolvencies.”
Red Flag Alert is Begbies Traynor’s analytical resource for measuring corporate distress signals. Distressed businesses are categorised as either ‘critical’; having County Court Judgments totaling £5,000 or more and/or winding-up petition related actions, or ‘significant’; having either a court action and/or poor, very poor, insolvent or out of date accounts.
Red Flag Alert also highlighted problems in the IT industry where, nationally, 27 per cent more businesses showed signs of distress in Q4 compared with Q3, making it the hardest-hit sector.
