Yorkshire economy shows slight improvement amid increased business distress

Business distress across Yorkshire decreased in every sector of the regional economy in the first quarter of this year, compared to the final quarter of 2017, according to research by Begbies Traynor.

The quarterly Red Flag Alert data, 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.

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.

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 sectors hit hard 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.

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.”