Home Finance & Investments Rising tide of financial distress sees number of Humber businesses in trouble...

Rising tide of financial distress sees number of Humber businesses in trouble up by a quarter

Andrew Mackenzie, partner at Begbies Traynor Group in the Humber region

A rising tide of financial distress is continuing to affect businesses in the Humber region and across the UK, despite forecasts that the country is set to emerge from recession. High interest rates and supply chain issues remain persistent problems for many firms and the number of businesses in the Humber region facing financial problems had increased by a quarter in the year to Q1 2024, according to the latest Red Flag Alert data from leading independent business rescue and recovery specialist Begbies Traynor Group.

The report found that in Q1 of this year, early-stage or ‘significant’ financial distress had risen by 25% in the region since Q1 2023, affecting 2,000 businesses in the region. Quarter on quarter, however, the number of ‘significantly’ distressed Humber firms had fallen by 1%. The region’s economy fared slightly better than the UK as a whole, which saw a 31% increase in significant distress in the same 12-month period.
The retail sector was one of the worst affected by increasing distress, impacted by both inflation and the decimating effect of the cost-of-living crisis on consumer spending. Food and drug retail saw an increase in distress of 39% year on year, while among general retailers in the region, distress was up 30% year on year and 8% on the previous quarter.

Other sectors hit by rising levels of financial problems included health and education, which spans medical and dental practices, childcare and care homes. The health and education industry in the Humber region saw levels of ‘significant’ distress increase by 113% year on year, slowing to a rise of just 1% since Q4 2023.

Construction continued to be the sector with the highest number of distressed firms: 352 in the Humber region, up 24% year on year, but stabilising to less than 1% increase on the previous quarter.

Industrial transport and logistics, which includes all freight and cargo transport, was also facing rising distress levels, up 14% on Q1 of last year.

Andrew Mackenzie, partner at Begbies Traynor Group in the Humber region, said: “Beleaguered businesses are struggling in the face of persistently high interest rates, which continue to pile the pressure on. Many firms are seeing the costs of servicing debts escalate, at a time when reduced consumer demand is exacerbating financial strains.

“This is compounded by geo-political turmoil and ensuing supply chain disruptions and although economic growth is forecast to rally this year, in the current environment we are advising businesses to keep tight control of their finances and seek professional help at the first signs of trouble to avoid problems becoming insurmountable.”