BUSINESSES in Southampton face a difficult autumn in which struggling firms will be overwhelmed, an insolvency expert has said.

Although the number of city businesses in significant distress fell three per cent in the second quarter of this year to 2,664, some key sectors saw a rise.

Serious distress rose by six per cent in the telecoms and IT sector and by three per cent in leisure and cultural businesses, compared with the previous quarter.

The figures come in the Begbies Traynor Red Flag Alert, which monitors the financial health of companies. The figure for significant distress is 16 per cent down on last year, when government support for businesses was still in place.

Nationally, the research saw 582,452 businesses in significant distress amid rising inflation, labour, material and energy prices, and faltering consumer and business confidence.

County court judgements (CCJs) were up five per cent on the previous quarter, to 46,235 nationally, with the figure driven higher as courts clear backlogs and debts are pursued. There were only 59,042 CCJs during the whole of 2021.

Steve Powell, partner at Begbies Traynor in Southampton, said: “Having emerged from the pandemic, companies in Southampton were hoping for an economic boom but that has simply fizzled out, as a combination of economic issues have taken their toll, reducing both business and consumer confidence.

“Indeed, rising insolvency rates, combined with our own anecdotal evidence from speaking to the directors of distressed companies, highlight the impact of rising costs on businesses.

“Many are fighting on, but the environment is only going to get worse, not better, at least until next year. I fear that it will be a troublesome autumn as businesses which have struggled for so long are finally overwhelmed.

“That is why it is so important that any businesses facing financial difficulties, for whatever reason, should seek professional advice in order to fully understand the options available.”

As previously reported, seasonally adjusted figures for corporate insolvencies rose 12.6 last quarter compared with the period before. The total of 5,629 was 81.3 per cent up on the same period last year and the highest since 2009.

The Red Flag Alert draws on a range of legal and financial data to measure corporate distress.

Businesses defined as being in “significant distress” have minor CCJs, of less than £5,000, filed against them, or have been identified by Red Flag Alert’s credit risk scoring system, which takes into account signals such as working capital, contingent liabilities, retained profits and net worth.