Why the number of Yorkshire firms struggling financially has fallen

The Red Flag Alert figures for the three months to September 2021 showed a 15 per cent decline in the number of distressed businesses in Yorkshire compared to the previous quarter.

However, there had been only a 1 per cent year-on-year fall in the number of distressed companies, in comparison with the third quarter last year before the second national lockdown was imposed in November.

The new data revealed that a total of 33,000 Yorkshire firms were displaying symptoms of early-stage or ‘significant’ financial distress in the three months to September, down from almost 39,000 businesses at the end of June this year.

Significant distress refers to companies that have financial problems such as having minor county court judgements of less than £5,000 filed against them.

The UK as a whole saw a 14 per cent drop in significant distress compared to the previous quarter and a 1 per cent increase year-on-year.

Begbies Traynor’s figures also revealed a rise in the number of firms displaying the more serious symptoms of ‘critical distress’ which includes having county court judgements of over £5,000 filed against them.

In Yorkshire, critical distress was up by 13 per cent on the previous quarter and by 10 per cent year-on-year.

Construction was one of the hardest hit sectors, with 38 firms affected, an increase of 52 per cent on the third quarter of 2020 and 19 per cent on the previous quarter.

Soaring costs and labour shortages have been weighing down on many businesses in recent months with supply chains also being stretched.

Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “The staycation boom and reopening of the hospitality sector have played a significant role in fuelling a welcome rebound in Yorkshire’s economy.

“We’re seeing bars, restaurant and hotels all benefitting from the easing of most of the remaining Covid restrictions at the height of the summer, when international travel restrictions also largely prevented foreign holidays.

“However, the multiple challenges of soaring prices and the ongoing scarcity of raw materials, combined with chronic labour and skills shortages, is weighing heavily on businesses across many sectors.

“Add to this the pressures of escalating fuel costs, severe shortages of lorry drivers and the ensuing supply chain disruption, and it’s clear this is very rapidly becoming a perfect storm for many businesses.”

He added: “While we all hope post-pandemic economic recovery is on the cards, the worry is that too many small businesses will go under before the Government addresses the serious logistical issues resulting from Brexit and Covid – and the chronic increase in ‘critical’ business distress revealed by our latest figures may already bear this out.

“Small businesses that are struggling financially should seek professional help now before their situation becomes more serious.”

In Yorkshire, bars and restaurants saw an 8 per cent decline in significant distress since the second quarter of this year, with 1,660 businesses struggling.

Hotels and accommodation saw a 5 per cent decrease on the previous quarter, with distress affecting 370 businesses.

Despite a 16 per cent drop in the numbers of construction firms struggling with significant financial distress since the previous quarter, 4,600 businesses in the region were still affected.

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James Mitchinson