Analysis by business advisory firm, Quantuma, has revealed the extent to which SMEs in the North-west have bounced back after the Covid-19 pandemic.
In Q4 of 2021, the number of severely distressed SMEs in the North-west decreased, in contrast to much of the rest of the UK. Despite this, and stable growth in the region, the North ranked poorly against other parts of the country when it come to financial strength.
Since the pandemic, the region’s manufacturing sector has helped underpin the performance of the region’s economy, with North-west manufacturers outperforming counterparts in all other regions except the Midlands. Other sectors recording a strong bounce-back include construction, education, agriculture, retail and wholesale.
Analysis was carried out using Quantuma’s Clarity model to identify opportunities for growth as well as levels of distress amongst SMEs. Most concerningly for the Greater Manchester economy and surround areas, the analysis found that 95% of SME employees in Manchester were with firms that demonstrate the second-highest signs of distress in the UK; this contrasts with just 17% in similar-sized Leeds. Across the wider region however, Manchester accounts for 80% of the total North-west SMEs in financial distress.
Looking ahead into 2022, Quantuma’s analysis showed that where other UK regions had seen the number of most distressed businesses increased between Q4 of 2021 and Q1 of 2022, the North-west had bucked the trend, with the relative share of such companies decreasing.
Frank Ofonagoro, managing director and head of Quantuma’s financial advisory team in the North West, said:
“Like many other parts of the UK, the North of England has experienced unprecedented levels of distress in the last two years and whilst it is encouraging to see some of the positive insight from Clarity on SME growth there are more challenges ahead for the North West business community. For those businesses that are facing increased pressure on cash flow and their balance sheet, the earlier they review and diagnose the reasons for underperformance, the more time they will have to identify and implement relevant recovery options.
“Clarity enables us to proactively identify those businesses that are in need of that support, and we are now working with the wider advisory community to focus efforts toward sectors most at risk, as pressure builds on businesses from rising inflation, interest rates and the cost-of-living crisis.”