Tuesday, April 23, 2024

East Midlands start-up boost comes with warning of ‘perfect storm’

New research from the Midlands branch of R3, the UK’s insolvency and restructuring body, indicates that a ‘perfect economic storm’ could be brewing in the region as the number of East Midlands start-ups hiked sharply last month, along with a significant rise in cashflow ‘red flags’.

Based on an analysis of data from business intelligence provider Creditsafe, the R3 Midlands figures show that start-ups rose steeply by 49.3% in the East Midlands in January, from 2,006 in December to 2,995. Year-on-year, the January figure highlights a rise of 21.75% compared to January 2023, when start-ups numbered 2,460.

Crucially, the R3 analysis also shows that levels of debts owed by East Midlands businesses in liquidation in the region more than tripled (246.43%) last month and rose by over one fifth (37.59%) in comparison with January of last year. In addition, the number of local companies with late payments on their books has begun to rise for the first time in recent months.

R3 Midlands Chair Stephen Rome, a partner at the local office of law firm Penningtons Manches Cooper, said: “Significant increases in the number of local businesses, along with substantial rises in late payments and monies owed by firms in liquidation could create a perfect economic storm if the region’s new entrepreneurs fail to cushion cashflow and keep the sharpest eye on costs.

“We are facing extremely challenging times in our local economy, with very tricky trading conditions across all sectors, but they can be navigable if entrepreneurs are duly cautious and don’t back away from taking professional advice when needed.

“Patience may also be a virtue as new economic forecasts see a fall in inflation this spring, enabling the Bank of England to cut interest rates towards the middle of the year. If this happens, it will give companies far more stability and certainty to plan ahead and invest in their operations.

“In the meantime, should significant cash flow difficulties arise, it’s crucial for business owners to take professional advice as soon as possible. There is a significant amount which can be done to rescue and support local companies if help is taken early enough.”

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