Transport has overtaken technology to become the North West’s most distressed sector, according to new research by the UK insolvency and restructuring trade body R3.
Around 40% of transport businesses in the region – equivalent to over 2,100 firms – are considered to have a higher than normal risk of failure within the next 12 months. The sector, which is also one of the fastest growing in terms of business numbers, includes haulage, couriers and delivery firms.
The level of business risk is almost twice as high as that in manufacturing and hotels, where 21% of firms have a higher than normal risk of failure, and significantly higher than pubs (26%), restaurants (27%), construction (28%) and professional services (31%). Only the technology and IT sector (36%) comes close in terms of the number of businesses at risk. The data is based on figures from the BvD database.
Richard Wolff, North West Chair of R3 and Head of Corporate Recovery and Insolvency at law firm JMW, said: “Transport is a highly competitive sector where margins are constantly under pressure. Haulage firms will have been feeling the squeeze this year due to the rise in fuel prices and the introduction of the National Living Wage in April, as well as continued problems of late payment by bigger customers.
“Meanwhile there have been a lot of new entrants in the sector, with increased demand for courier firms due to the rise in internet shopping and platforms such as Uber and Deliveroo making it easier to start up new businesses. Again, competition can make it difficult to cover overheads, whilst new firms in themselves are more vulnerable than established businesses and less likely to have reserves to fall back on.
“Transport companies and other companies which offer logistics as a principal part of their core services need to scrutinize costs and cash flow to ensure they remain viable and be careful not to rely on debt funding that they cannot afford to repay.”