A rising tide of financial distress is continuing to engulf businesses in Yorkshire 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 Yorkshire facing financial problems had increased by over a third in the year to Q1 2024, according to the latest Red Flag Alert data from leading independent business rescue and recovery specialist Begbies Traynor.
The report found that in Q1 of this year, early-stage or ‘significant’ financial distress had risen by 36% in Yorkshire since Q1 2023, affecting 38,000 businesses in the region. Quarter on quarter, however, the number of ‘significantly’ distressed firms in Yorkshire had grown by just 2.21%. The region’s economy fared slightly worse than the UK as a whole, which saw a 31% increase in significant distress in the same 12-month period.
Very severe, or ‘critical’ business distress, which puts companies in imminent danger of insolvency, had also risen by 33% since Q1 of last year, affecting 2,800 businesses in the region.
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 54% year on year and of 17% since Q4 2023 in Yorkshire, while among general retailers in the region, distress was up 34% year on year and 10% on the previous quarter.
Other sectors hit by rising levels of financial problems included media, which spans advertising, newspaper, TV, radio film and books. The media industry in Yorkshire saw levels of ‘significant’ distress increase by 55% year on year and 17% since Q4 2023.
Construction continued to be the sector with the highest number of distressed firms: more than 6,200 in Yorkshire, up 39% year on year, but falling by 1% since the previous quarter.
Julian Pitts, Begbies Traynor’s regional managing partner in Yorkshire, said: “Persistently high interest rates continue to pile pressure on beleaguered businesses who are struggling with the costs of servicing debts, 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 expected 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.”
