Following a year of uncertainty in the wake of the Brexit referendum, the construction sector is starting to feel the impact of Britain’s fragile economy with rising numbers of firms at higher than normal risk both in Yorkshire and across the UK.
The latest research by R3 shows that in July, more than a quarter (27%) of the region’s construction businesses were at higher than normal risk of insolvency, representing 6,508 of the 24,104 active construction firms in Yorkshire. This is a rise of 3.6% since the previous month and is slightly above the national figure of 26.8% in the overall negative band.
A number of other regions surveyed were also above the national average, the highest being the North East which had 28.6% of construction businesses at higher than normal risk; followed by the South East (28.2%); London (27.7%); and the South West (27.4%).
However, Yorkshire outperformed other regions in many other sectors including agriculture with just 18.4% of businesses in the negative band, well below the UK-wide average of 20.4%; in manufacturing with 21.1% at higher than normal risk compared with the national figure of 22.1%; and in hotels with 18.7% in the region and 19.9% nationally.
Overall, 61,058 businesses in Yorkshire were deemed to be at higher than normal risk of insolvency, a month on month rise of 3.4% bringing the level to 28% of active businesses in the region, slightly above the national figure of 27.4%.
Adrian Berry, chair of R3 in Yorkshire and restructuring partner at Deloitte LLP, commented:
“There’s no doubt that, faced with stagnant wages, rising prices and inflation concerns, consumers are starting to feel the pinch this and is already impacting spending patterns – we are seeing a knock-on effect in a number of sectors which has a direct impact on construction which relies so much on consumer confidence. This is a worrying trend as the construction sector is often one of the first to feel the impact of a downturn.
“The resilience of the UK economy post referendum is now starting to be tested, particularly as the General Election has done little to ease uncertainty or provide clarity as we enter into Brexit negotiations. While Yorkshire businesses are continuing to hold their own compared with other parts of the UK, they should prepare for some challenging times ahead.”
R3 uses research compiled from Bureau van Dijk’s ‘Fame’ database of company information to track the number of businesses in key regional sectors that have a heightened risk of entering insolvency in the next year.
