Yorkshire businesses are being hit by swiftly escalating levels of financial distress across every sector of the regional economy, with construction, automotive, manufacturing and retail all seeing double-figure increases, both quarter on quarter and year on year.
The quarterly Red Flag Alert data, which is produced by leading business rescue and recovery specialist Begbies Traynor, reveals that in April, May and June of this year both very severe ‘critical’ distress and less serious ‘significant’ distress levels rose in Yorkshire and across the UK.
In Yorkshire ‘critical’ distress, which refers to businesses which have had winding up petitions or county court judgements of more than £5,000 taken out against them, was up by 26% when compared to the same period last year, affecting 165 businesses.
‘Significant’ distress, which relates to businesses with minor CCJs filed against them, or those showing a marked deterioration in key financial ratios, had risen by 9% in the past three months and by 24% since the same period in 2016 to affect more than 20,000 businesses in the region (20,169 in total). Across the UK as a whole ‘critical’ distress rose by 21% year on year and ‘significant’ distress was up 25% compared to Q2 2016.
The construction industry was particularly badly hit by both ‘critical’ and ‘significant’ distress and construction companies accounted for more than a quarter (27%) of all the ‘critically’ distressed businesses in Yorkshire, having seen a 29% rise in severe distress since the same period last year. Construction also saw a 25% climb in ‘significant’ distress since last year’s figures, with the industry making up 14% of all ‘significant’ distress in the region, affecting 2,782 building companies.
Other Yorkshire industries which saw a jump in distress levels include manufacturing, which saw ‘significant’ distress rise by 16% year on year to affect 1,004 businesses; food and drug retail, which was up by 14%; general retail up by 20%; and bars and restaurants up 20% to affect 981 businesses.
Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “The escalating levels of ‘significant’ distress, which are affecting every industry across our region, are of major concern and spell a discouraging forecast for both the Yorkshire and the UK economy. The worrying fact is that these sorts of less severe financial problems are generally seen as a warning of more serious problems to come and this is extremely unwelcome news.
“The recently reported drop in manufacturing output, a construction industry slowdown and widening of Britain’s trade deficit by the Office of National Statistics have all helped to knock the value of the pound against the dollar and the euro still further and suggest an alarming reversal of the economic resilience that was being hailed by some after last summer’s referendum.
“Yorkshire businesses should certainly ensure they have battened down all the hatches and have robust management systems and processes in place, as there is certainly no clear sense of when, or how, this impending economic storm is likely to pass,” added Mr Pitts.