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The number of active businesses in the North West fell by over 1,600 in May after reaching record levels the previous month, according to research by insolvency and restructuring trade body R3.

The fall is the first since August last year when numbers fell by just 66 and follow a period of two and a half years which have seen business numbers rise from under 320,000 to almost 370,000.

The figures show there are now 368,167 active businesses in the region – 0.4% fewer than in April but still 17% higher than in December 2015.

Paul Barber, North West Chair of R3 and a partner at Begbies Traynor, says the fall could be a sign that the rapid growth is starting to level out: “The unprecedented rise in the number of active businesses in recent years reflects the start-up culture. It is arguable that the people in the North West have tried to embrace that entrepreneurial culture and are more open to running their own business or, in some cases, more than one!

“However it may be that the rapid month-on-month growth is simply unsustainable. New businesses are particularly vulnerable in the first few years so we can always expect some fall-out. But at the same time changing trends and other pressures have resulted in the loss of many traditional-type businesses. While we have seen a rise in insolvencies recently, other businesses may have chosen to close down voluntarily.”

Paul Barber said it was difficult to pinpoint any particular sector where numbers had fallen, although some sectors had bucked the trend. For example, there were 129 more restaurant businesses in May than the previous month and 222 new construction firms. Overall the North West figures are in line with the national figures, which also show a fall of around 0.4% in business numbers in May.

Paul Barber adds: “Britain has become more of a nation of entrepreneurs in recent years which can only be a good thing. However new ventures always entail risk, while the climate of uncertainty, changes in the tax and other regimes and technological disruption is challenging, even for established firms let alone less experienced entrepreneurs. All businesses need to keep a close eye on profitability and seek expert help at an early stage if financial problems arise. The earlier the approach to an R3 member, often the more the options there are to assist.”

The figures are from R3’s latest insolvency risk tracker. The tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.