Yorkshire economy rallies slightly in face of climbing business distress

Business distress in Yorkshire shrank across every sector of the regional economy in the first quarter of this year, compared to the final quarter of 2017, according to research published today (25 April) by Begbies Traynor.

The quarterly Red Flag Alert data, produced by leading business rescue and recovery specialist Begbies Traynor, reveals that in the first three months of 2018, ‘significant’ distress among businesses in Yorkshire dropped by 3% compared with the final quarter of last year, to affect 28,793 firms in the region. Business distress across the UK as a whole also fell by 3% over the same period.

Year on year, however, ongoing ‘significant’ distress levels were up both in Yorkshire and in the UK as a whole. By Q1 of this year 27% more businesses in Yorkshire were in financial difficulties than in the same period at the start of last year, with 33% more affected across the whole of the UK. Nevertheless the year-on-year increase in Yorkshire was one of the lowest in the country, with the steepest rise in distress recorded in London, at 42%.

‘Significant’ distress relates to businesses that are 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 displaying a marked deterioration in key financial ratios. The symptoms are often viewed 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.

The construction industry in Yorkshire, and in the UK, remains the hardest hit sector with 4,210 Yorkshire building firms affected by financial difficulties in Q1 2018. Despite a 3% fall in distress in the construction sector in Yorkshire in Q1 of this year, compared to Q4 of last, year on year the number of distressed construction businesses was up by 22% in Q1 2018.

Other hard-hit sectors in Yorkshire included firms involved in leisure and cultural activities, professional services, real estate and sport and health, all of which saw business distress rise by almost 40% in the 12 months to Q1 2018.

Commenting on the latest Red Flag Alert figures, Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “One year into the formal Brexit negotiations and financial distress is now affecting almost 29,000 businesses in our region. That is 27% more companies in financial trouble than when Article 50 was triggered one year ago. With so much uncertainty still surrounding the effects of Brexit this does not bode well for economic growth and stability, in the short term at least.”

He added: “The disruptive effects of currency fluctuations, low real wage growth, rising interest rates, along with subdued consumer spending and the stagnating property market, are all taking their toll and have combined with growing political uncertainty to push hard-pressed businesses, into financial difficulties.

“SMEs are particularly at risk of being negatively affected by economic instability and the best advice is to seek professional advice if you are concerned about the cashflow or financial sustainability of your business.”

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