Worries as Yorkshire firms show most signs of distress

Yorkshire businesses are showing more signs of distress than those in other regions, according to new research.

Figures issued by insolvency trade body R3 show that more than two thirds (68 per cent) of businesses in the Yorkshire and Humber region are showing at least one sign of distress, a higher rate than any other region outside London.

The retail sector is experiencing significantly higher signs of distress than any other sector, with retail businesses more likely than any other to be concerned about their debt levels (41 per cent).

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Nationally, eight per cent of those in the retail sector say that they are very likely to enter into insolvency in the next 12 months, compared with a cross-sector average of two per cent.

Fifty eight per cent of retailers are experiencing a decrease in profit which is 24 per cent higher than the cross sector average.

Almost half of retailers have suffered a fall in sales volume, with a third saying they have seen a fall in market share. A quarter of retailers say they are having cash flow difficulties – nine per cent more than the cross-sector average.

Andrew Walker, chairman of R3 in Yorkshire and a partner at Irwin Mitchell, said: “The numbers show that we are bearing the brunt of the tough times here in this region, and Yorkshire businesses are the most likely outside the capital to be suffering. In particular retailing is being hit very hard indeed.

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“The pressure on retailers is two-fold. As consumers have less money to spend, stores are discounting their prices to get people through their doors; this is at a time when inflation and rising commodity prices have increased retailers’ costs.

“Given the importance of retailing to our region, it is extremely worrying that nationally one in four are experiencing cash flow difficulties. This suggests that many are holding a large amount of stock or have slow moving stock.

“Unfortunately this year cash-strapped consumers are likely to hold off until the Christmas sales before making significant purchases thus putting further strain on retailers in the coming quarter.

“This bleak outlook is coupled with a trend that sees creditors becoming generally less supportive, with only around a quarter of businesses stating that banks, HMRC or trade creditors have shown support in the past quarter, a figure that is down from over 40 per cent just three months ago.”

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The findings show that, across the sectors, the number of businesses experiencing distress has fallen. However levels of distress are significantly higher amongst retail businesses.

Retail is one of the sectors which R3 members have reported the highest increase in new insolvency cases, amongst these the high profile cases include Habitat, TJ Hughes and Jane Norman.