Yorkshire businesses ‘pushed to the brink’ by escalating financial distress

High interest rates, together with persistently high inflation and a weakening economy, are combining to push increasing numbers of businesses across Yorkshire to the brink, according to the latest Red Flag Alert data from leading independent business rescue and recovery specialist Begbies Traynor.

The report found that in Q3 of this year combined distress rates in the region had risen rapidly since the previous quarter, climbing by 13.3% to affect 35,332 businesses. Very severe, or ‘critical’, distress was up by 29.9% on Q2, leaving 2,495 Yorkshire firms facing potentially major financial problems, with a marked deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.

Across the UK, combined business distress increased by 9.8% on the previous quarter and 4.4% year on year, to affect more than half a million companies (515,898). Critical distress was up by 25% on the previous quarter and affected 37,722 firms nationally.

Julian Pitts, Begbies Traynor’s regional managing partner in Yorkshire, said: “Inflation is still extremely high, despite the recent fall, and firms in Yorkshire and across the country are facing continued increases in the costs of running a business, as well as the challenges of weakening customer demand and high borrowing costs.

“These blows are now pushing many businesses to the brink and are made harder to cope with by the fact that many firms’ finances are in a vulnerable state as a result of the covid pandemic, followed swiftly by the cost-of-living crisis.

“It goes without saying that for any business owners who are beginning to experience financial difficulties, seeking professional advice can mean the difference between charting a route back to financial health, or the problems accumulating to become insurmountable.”

According to Begbies Traynor’s report, construction, support services (which includes a range of businesses from call centres to conference organisers and funeral providers), and real estate and property services companies were the sectors that saw the highest numbers of Yorkshire businesses in critical distress.

More than 460 construction firms in the region were suffering critical financial distress, an increase of 65% since Q2 2023.  Support services accounted for 320 critically distressed businesses in Yorkshire (24% up on Q2 2023), while real estate and property services stood at 302 businesses afflicted by incidences of critical distress, up 32% on the same three months last year.

Sectors including hotels and accommodation and travel and tourism saw distress levels fall on the previous quarter, with the rise in ‘staycation’ summer holidays boosting both industries.