BELFAST BRIEFING:A pre-Christmas cold snap is the last thing firms struggling with lower demand need, writes FRANCESS McDONNELL

THE ARCTIC conditions in Northern Ireland could push struggling businesses close to the brink into “premature bankruptcy”, a leading economic think tank in the UK is warning.

Retailers, who rely on pre-Christmas trade for the bulk of annual turnover, may grab the headlines but firms hit by staff absences and delivery problems are also bearing the brunt of the impact of the cold spell.

According to the Centre for Economics and Business Research (CEBR), the recession means more businesses than usual are “close to the verge of bankruptcy”. It says businesses facing a combination of lost daily production and delayed payments could face difficulties on profits and cash flow.

The CEBR believes such a double whammy might propel some struggling businesses into “premature bankruptcy”.

It is a chilling warning for local firms, particularly small to medium-sized businesses that have been among the worst hit by the aftershocks of the downturn.

And, according to economic research to be published later this month, the plunge in temperatures might just be the tip of the iceberg when it comes to what businesses are struggling to contend with in the current economic climate.

Cash-flow problems, falling sales and rising overheads are just some of the issues identified by companies across Ireland in a new survey commissioned by the business development body InterTradeIreland. Its latest quarterly business survey shows many businesses have experienced a significant decline in demand.

Smaller firms, those with 10 or less staff, are among those struggling most while companies operating in the leisure, hotel, catering and construction sectors are having the hardest time of all.

An analysis by region shows that businesses based in the republic have fared the worst, InterTradeIreland says.

Between July to September of this year, 42 per cent of those taking part in the survey said sales had plummeted.

What this means in reality is job losses and, according to InterTradeIreland, businesses in the South were again hardest hit in this respect.

Firms in Northern Ireland are slightly more positive than Southern companies about the possibility of improved sales figures and employment levels in the future. The survey suggest this is because more businesses in the South (some 61 per cent of participants) claim to have been more “severely affected” by the economic downturn than their counterparts in the North (36 per cent).

Companies based south of the Border may have experienced the worst of the downturn to date but firms in Northern Ireland have not escaped either.

In fact, according to Aiden Gough, strategy and policy director with InterTradeIreland, companies engaged in cross-Border trade have been hard hit. The business development body’s research shows that 32 per cent of Northern Ireland companies sell to the Republic while 24 per cent of those based south of the Border export to the North.

Gough says, overall, exports from North to South have slipped 6 per cent but that this is against a longer-term picture which shows a 50 per cent increase in such trade over the past decade.

“Three-quarters of total exports by small businesses in Northern Ireland go to the Republic of Ireland, so it remains a vital market,” he adds.

If there is one issue identified in the latest quarterly survey that strikes a common chord North and South, it is banking. According to InterTradeIreland, one in six firms believes the relationship with their banks has deteriorated over the past year, particularly in the North.

Few businesses consider the terms of their current loan arrangements or overdrafts “to be attractive”.

The survey notes that one in five firms say they have spoken to their banks about restructuring credit arrangements. Fewer than half of the 1,000 firms which took part in the survey believe they would be successful if they were to approach their banks for a loan, with companies in the North slightly more optimistic than those in the South.

In one of the most striking features of the survey, small firms in particular see themselves being frozen out by the banks in terms of access to finance North and South.

According to InterTradeIreland, they are more likely to be turned down for a loan compared to larger firms, with levels of rejection similar on both sides of the Border.