Black Country economy is proving 'resilient', says report

According to the latest Begbies Traynor’s Red Flag Alert for the second quarter of the year, 472,183 businesses were experiencing ‘significant’ financial distress at the end of June 2018, up nine per cent, or 38,000, compared to the same stage last year.

But the total had dipped one per cent on the previous three months of this year.

The Red Flag data, monitoring the financial health of UK companies, reveals levels of financial distress are increasing at a slower rate year on year than during the previous four quarters, which could be a tentative sign of returning stability across the economy.

The trend was reflected in Wolverhampton, where the number of businesses in ‘significant’ distress fell marginally from 1,380 in Q1 to 1,327 in Q2. Twelve months ago, there were 1,308 firms experiencing ‘significant’ problems in the city. In Dudley the figure has fallen four per cent over the 12 months to 479, but in Sandwell it has risen 10 per cent to 479 firms suffering ‘significant’ problems.

In Walsall the number suffering 'significant' problems rose 11 per cent over the 12 months, to 975, although there was a slight dip in the last three months. Across the Midlands, the number of businesses in ‘significant’ financial distress fell from 57,491 in Q1 to 56,612 in Q2, but were up from 53,755 in Q2 2017.

Gareth Prince, partner at Begbies Traynor in the West Midlands, said: “Whilst distress levels remain high, these latest figures are a source of encouragement and a sign that the economy in Wolverhampton and wider Black Country region is proving as resilient as any part of the UK economy.

"We put this down to growing consumer confidence linked to improved job security, solid wage growth and a dampening of fears that interest rates were going to rise significantly.

“We expect the positive trend to continue but with problems in certain industries, such as retail where there has been a plethora of casualties of well-known high street brands. Estate agents are also facing difficulties, as a result of ongoing disruption in the market by digital players.

“Looking at other factors affecting the economy, Brexit uncertainty perhaps places the biggest question mark over the future. But business confidence hasn’t been massively affected and many firms feel that any disruption caused by the UK exiting the EU is likely to be minimal.”

The sectors with the highest number of businesses in distress year on year were support services (112,434, up 10%), construction (60,208, up 4%), real estate (42,254, up 19%), telecoms (31,770, up 9%) and general retailers (30,574, up 4%). However, on a quarterly basis, levels of ‘significant’ distress across these key sectors appear to have stabilised.

In Wolverhampton, distress levels among construction, transport and logistics firms and property services businesses all remained broadly flat in recent months.

In Wolverhampton, many sectors experienced a stabilising of distress levels between Q1 and Q2 2018. ‘Significant’ distress amongst construction (166 to 170, up 2%), industrial transportation & logistics (50 to 48, down 4%), and real estate & property services (113 to 111, down 2%) remained broadly flat during the three months to June 2018.

Ric Traynor, executive chairman of Begbies Traynor, added: “With snow grinding thousands of UK businesses to a halt back in March, the return of warmer weather in Q2 and a timely boost from the royal wedding in May helped the UK bounce back to growth in June, as our research and other key economic indicators point to a steadying business environment across the country.

“Stronger growth in the UK’s service sector, boosted by increased demand for financial services, combined with a surprise rebound in construction activity in June, which increased at its fastest level in seven months, are both clear bellwethers for a rebounding economy.

“However, with manufacturing growth down on last year, continued inflationary pressure, slowing wage growth and potential rate rises on the horizon, we’re not out of the woods yet. There still remains a heightened level of distress among UK businesses and the slight improvement in the second quarter could yet prove to be temporary.”