West Midlands start-ups soar as insolvency experts warn of heightened cashflow ‘red flags’ – report

A steep rise in the monthly number of businesses set up in the West Midlands since the end of last year is coinciding with a substantial heightening of cashflow ‘red flags’, indicating that a ‘perfect economic storm’ could be brewing in the region.

This is according to the Midlands branch of national restructuring, turnaround and insolvency trade body R3 and is based on a monthly analysis of regional start-up data from business intelligence provider Creditsafe.

The R3 Midlands figures show that the monthly number of start-ups rose steeply by 48.58 per cent in the West Midlands in July compared to last December, and by 17.92 per cent against July last year.

At the same time, insolvency-related activity – which includes liquidator and administrator appointments as well as creditors’ meetings – rose by 27.48 per cent in July in comparison with December 2024, and by 10.55 per cent against July 2024.

The R3 analysis also shows that the number of local companies with late payments on their books remains high.

In July, 50,986 West Midlands businesses had unpaid invoices past their due date.

R3 Midlands chair Stephen Rome, a partner at the Birmingham office of law firm Penningtons Manches Cooper, said: “While local entrepreneurs are becoming increasingly confident in riding out current economic challenges – which include higher employment costs, cautious consumer spending and growing global uncertainty – insolvency-related activity in the region has risen and late payments remain a significant issue.

“If we are to avoid the destructive effects of any economic ‘perfect storm’, it is essential for entrepreneurs to be extra-vigilant, keeping a sharp eye on costs and cushioning cash flow where possible. Business owners should also not back away from taking professional advice as soon as it may be needed.

“Conversations about finances are not always the easiest ones to have, but there is a significant amount which can be done to rescue and support local companies if help is taken early enough.”