Levels of business distress stay ‘stable’ in Yorkshire

Yorkshire was the only English region where levels of business distress did not increase in the first three months of this year, according to the latest quarterly Begbies Traynor Red Flag Alert research, which monitors the financial health of businesses in the UK.

In Yorkshire, the number of businesses showing signs of very serious or ‘critical’ distress, remained stable at a total of 240 companies, in the first three months of 2014. This compares with 239 in the final quarter of last year.

Only Scotland and Northern Ireland saw quarter-on-quarter decreases in critical distress, while all other English regions witnessed a rise in distress levels, with the East of England the highest at 12 per cent. The year-on-year critical distress statistics were also encouraging. Yorkshire showed a three per cent decrease in the number of distressed businesses, against a UK average drop of seven per cent.

Yorkshire’s less serious but far more prolific significant distress levels also showed a one per cent increase for the first quarter of 2014 when compared with the fourth quarter of 2013, although year-on-year distress levels increased by 18 per cent, a rate of increase reflected across all UK regions.

Sectors within Yorkshire continued to experience contrasting fortunes, There are signs that construction is regaining confidence. The industry showed a 15 per cent yearly drop in critical distress levels, as well as a two per cent quarterly reduction, although it remained the sector most severely affected by distress, representing 23 per cent of all cases of “critical” business distress in Yorkshire.

Other sectors of the Yorkshire economy also saw hefty increases in levels of significant business distress in the first quarter of this year compared with the same three months in 2013.

They included real estate and property services, a sector in which levels grew by 42 per cent from 864 to 1,226 companies; and media, where year-on-year distress levels increased by 27 per cent to affect 371 companies.

Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “This quarter’s Red Flag statistics show an encouraging and long-awaited return to some stability in the growth rates of serious business distress in Yorkshire.

“Although this is a welcome upturn and a tangible sign of recovery for the region, it is essential we don’t overlook the substantial number of businesses in Yorkshire that are suffering from earlier stage significant distress.

“More often than not, these early stage problems are a direct result of a scarcity of funding, escalating debt or management issues. While significant distress is far less serious than critical problems, the worry is always that if these businesses take their eye off the ball and fail to address the underlying issues with some urgency, they risk edging into critical distress.”