Yorkshire economy rallies in face of creeping business distress

Business distress among Yorkshire firms shrank marginally across almost every sector of the regional economy in the second quarter of 2018, compared to the first three months of the year, according to research published today (23rd July) by Begbies Traynor.

The quarterly Red Flag Alert data, produced by leading business rescue and recovery specialist Begbies Traynor, reveals that in the second quarter of 2018, ‘significant’ distress among Yorkshire-based businesses decreased by 1% compared with the first quarter of the year, to affect 28,580 companies in the region. Business distress across the UK as a whole also dropped by 1% over the quarter.

Year on year, however, ongoing ‘significant’ distress levels were up both in Yorkshire and in the UK as a whole. By Q2 of this year 7% more Yorkshire businesses found themselves in financial difficulties than in the same period in 2017, with 9% more affected across the whole of the UK and 17% more in London, the worse affected region.

‘Significant’ distress relates to businesses displaying what are considered to be the early warning signs of financial difficulties, including those that have had minor CCJs filed against them and those showing a marked deterioration in key financial ratios. The symptoms are often seen as a forerunner to more serious or ‘critical’ distress, which relates to businesses that have had winding up petitions or CCJs of more than £5,000 taken out against them.

Construction, in both Yorkshire and the UK, remains the hardest hit industry with 4,114 Yorkshire building firms affected by financial difficulties in Q2 2018. Although there had been a 2% fall in distress rates among Yorkshire construction firms in Q2 of 2018, compared to Q1, year on year there was a 3% climb in distress levels.

Despite the much-heralded positive contribution of the Tour de Yorkshire to the regional economy, tourism and leisure-related sectors including hotels and accommodation, and leisure and cultural activities in Yorkshire are showing a rise in ‘significant’ distress. Hotels and accommodation saw a 5% rise in Q2 compared to Q1 and a 12% increase since Q2 of 2017.  Leisure and cultural activities saw rises in distress of 2% quarter on quarter and 9% year on year.

Commenting on the latest Red Flag Alert figures, Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “After a weak performance in the first quarter of 2018, a period marred by weak consumer confidence, growing political uncertainty and the fallout from last winter’s Beast from the East, it is encouraging to see at least some tentative signs of stability emerging across the regional and wider UK economy in recent months.

“However with Brexit-related turmoil and uncertainty, the squeeze on household incomes and public spending cuts still taking their toll on many sectors of the economy, there may be little room for optimism. As ever, we urge the directors of small businesses in particular, which are always more vulnerable to economic instability, to proceed with caution and seek professional advice if they are concerned about the cashflow or financial sustainability of their business.”

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