News

January 06, 2012

North-south divide widens for businesses in 2011

Businesses based in the north are more than one and a half times more likely to go bust than those in the south, research by accountancy firm RSM Tenon has highlighted.

The data, based on figures from Companies House and the Insolvency Service, revealed that one in 40 companies in the north-east and north-west went insolvent in 2011, compared with less than one in 70 in London and the south-east.

RSM Tenon said that many of the firms failing in the north were manufacturing-based, and that higher production costs coupled with lower demand for goods in the current economy meant that businesses' often couldn't survive.

"It's a return to the old story – northern England used to be geared towards industry, but judged by the proportion of insolvencies, it appears that industry is still deserting it," said Carl Jackson, head of RSM Tenon's recovery service.

"If you make furniture, industrial materials, pharmaceuticals, or work in the wood, paper and board industry, you have a far higher chance of going bust if your company is based in the north than if its headquarters are below Watford," he added.

Phil McCabe, senior policy adviser at the Forum of Private Business, said the north-south divide was "as evident as ever". "In terms of small-business insolvencies, there is evidence it's widening with a bleak outlook for 2012," he added.

"Part of this could be down to the particular difficulties being faced by manufacturers, with the north of England being the UK's traditional manufacturing heartland, but there is also a far greater reliance on public sector spending in the north."

However, RSM Tenon said that business failures in the north could not necessarily be blamed on public sector cutbacks. "It's tempting to blame the rift on the current austerity period especially given that the north – and particularly the north-east – is relatively dependent on the public sector compared to elsewhere in the country," said Jackson. "But the proportion of failed public services companies in the north and the south was roughly similar this year."

A spokesman for the Department for Business, Innovation and Skills declined to comment on the figures.

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