The number of businesses across the Humber region affected by financial distress hit another record high in the final quarter of last year, according to the latest Begbies Traynor Group Red Flag Alert research, which has provided a snapshot of corporate health in the UK for almost two decades.
The report for Q4 2024 reveals that ‘significant’ or early-stage business distress had climbed rapidly, affecting 2,900 businesses in the Humber region and 655,000 business across the UK by the last three months of last year. The number of Humber companies with financial problems had increased by 22% since the same quarter in 2023 and by 6% since Q3 2024. For the UK, it was a similar picture, with ‘significant’ distress up 4% on the previous quarter and 21% higher than Q4 2023.
With year-on-year increases in significant distress across almost all industry sectors, the Humber region’s food and drink sector was particularly hard hit. Despite some signs of a pre-Christmas sales boost which saw falls in the number of distressed businesses on the previous quarter for food and drug retailers and food and drink producers, year on year the sector had been affected by a surge in distress.
Food and drug retail saw a 30% rise, while in food and drink production significant distress was up by 19% compared to Q4 in 2023. General retail was also hit by a year-on-year 42% rise in distress.
According to the latest Begbies Traynor Group figures, other sectors in the Humber region facing challenges included hotels and accommodation, where distress had risen by 22% since the previous three months and by a massive 69% year on year. Despite a small quarter-on-quarter drop in distress, bars and restaurants also saw a year-on-year hike of 23%.
The Humber region’s construction sector continued to hold the highest number of distressed businesses. At 541, that number was up by almost a quarter (24%) year on year.
Andrew Mackenzie, partner at Begbies Traynor Group in the Humber region, said: “The fact that we are seeing unprecedented numbers of businesses across almost every sector of the economy struggling with the multiple challenges they face, and being affected by financial distress, is extremely concerning.
“As we start a new year it is natural to look for some reasons for optimism, however the outlook for 2025 does look fairly bleak, as businesses face the prospect of escalating costs with rising operational outlay and higher wages adding to an already difficult situation.
“This will be compounded by the tax rises and increase in the national minimum wage levied on businesses in the Autumn Budget. All of this threatens to place further financial strain on businesses later this year, especially in labour-intensive sectors like retail and hospitality which are generally operating on very narrow profit margins.”
He added: “As ever, it is the army of small, owner-managed businesses that make up the backbone of the economy who, pushed to the brink, are often least able to withstand prolonged periods of financial insecurity. Our advice is always to seek professional advice as early as possible to ensure the best chance of future proofing your business.”
