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Brexit distress hits North East hospitality sector, report finds

The leisure and hospitality sectors in the North East have been dealt a blow by pre-Brexit insecurities, which have caused levels of ‘significant’ business distress to escalate by 9% in the last three months compared with the same period the previous year, according to data in those industries released today by leading business rescue and recovery specialist Begbies Traynor.

The region’s leisure and hospitality industries have been the hardest hit by financial problems. In the second quarter of 2016, North East hotel and accommodation businesses saw a rise in significant distress of 15% compared with the same period in 2015, while 7% more bars and restaurants, and 11% more leisure and cultural organisations, found themselves in financial difficulties. In the region’s sport and health sector, significant distress was up by 10%.

The effect on the region’s leisure sector has not been mirrored across the North East economy as a whole, however. The quarterly Red Flag Alert data shows that instances of significant business distress, the most common indicators of problems, have risen just 2% year on year in the region, compared to an 8% year on year increase in the previous quarter. The rise in the North East is just 1% higher than the UK average, and Northern Ireland (5%) was the only region to record a noticeably larger growth in distress.

Some businesses in the North East showed signs of improvement year on year with falls in distress recorded in media businesses, travel, retail, construction, and industrial and transportation.

Gillian Sayburn, director at Begbies Traynor’s Newcastle upon Tyne office, said: “It’s worrying that some sectors in the North East are already feeling the impact of the economic uncertainty in the run-up to Brexit.

“Significant distress is often seen as an early warning signal of more severe financial problems to come, which can lead to business failures.

“And while this data was largely recorded in the period before the referendum, the most recent consumer surveys - now that Brexit looks a certainty - are spelling further gloom with plummeting consumer confidence, particularly in the north of England.”

Ms Sayburn added: “With further disruption and change inevitable, small businesses need to prepare themselves for a rocky ride over the next few years amid fears that the UK could be facing another recession.”

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