The level of companies in Yorkshire encountering financial distress has skyrocketed since the EU referendum in 2016 but remains lower than the UK as a whole, new research shows.
Data from Begbies Traynor showed that business distress rose by 33 per cent in Yorkshire since June 2016. with 29,410 firms in the region shown to be in significant financial distress by the end of September, compared with 22,161 distressed businesses at the time of the EU referendum.
Across the UK as a whole financial distress has risen by 40 per cent since the referendum three years ago, affecting 489,000 businesses.
With the lowest September consumer spending figures on record and the housing market remaining subdued, customer-facing sectors have been particularly badly affected as confusion and uncertainty over Brexit continue.
The real estate and property services sector, both in Yorkshire and across the UK as a whole, has been especially hard hit with a 13 per cent rise in the number of Yorkshire property businesses suffering significant distress since the third quarter of 2018.
By September a total of 2,878 Yorkshire property firms were undergoing financial difficulties.
Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “The uncertainty and weak consumer spending in the wake of the EU referendum that was held more than three years ago now is having a cumulatively devastating effect right across our economy.
“While the low pound, and perhaps the success of large-scale events such as the UCI World Championships last month, has helped to generate some good news for tourism in the region, overall the picture is far bleaker.
“Businesses are increasingly frustrated that they cannot plan for the future, and that is putting a brake on the whole economy.
“For some, especially small companies, these kinds of setbacks are too much to bear and can lead to very serious problems indeed. I’d advise any business owner whose firm is in trouble to seek advice as soon as possible in order to avert potential disaster.”
Consumers’ reluctance to spend has also affected bars and restaurants across Yorkshire: a total of 1,331 businesses in the sector were in financial trouble in the last three months, a 10 per cent rise on the same period in 2018 and 5 per cent more than in the second quarter.
According to the Begbies Traynor research, construction remains the most severely distressed sector.
By the end of September some 4,202 of Yorkshire’s construction firms were in financial distress, a 2 per cent increase on the previous year.
By contrast, travel and tourism was one of the few Yorkshire industries to see distress levels fall, with a 6 per cent drop in distress year on year and quarter on quarter, and 174 companies in trouble.
The information is published in the latest quarterly Red Flag Alert data from Begbies, which monitors the health of UK companies.
It defines significant distress as companies with relatively minor financial problems such having CCJs of less than £5,000 filed against them, or showing a marked deterioration in key financial ratios and indicators.
It is often viewed as a warning of more serious financial problems to follow.