Published 31st Oct 2023, 16:45 BST

High interest rates, together with persistently high inflation and a weakening economy, have led to many regional businesses facing potentially major financial problems, with combined distress rates in the region climbing by 13.3 per cent to affect 35,332 businesses in the third quarter of 2023.

Very severe, or “critical” distress was also up by 29.9 per cent on the second quarter, affecting 2,495 Yorkshire firms.

The Red Flag Alert data revealed a marked deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.

The number of businesses in Yorkshire experiencing severe or critical distress has risen rapidly in the last three months, new data from Begbies Traynor. Picture Bruce Rollinson

Across the UK, combined business distress increased by 9.8 per cent on the previous quarter and 4.4 per cent year on year, to affect more than half a million companies.

Critical distress was up by 25 per cent on the previous quarter and affected 37,722 firms nationally.

Speaking on the new data, Julian Pitts, Begbies Traynor’s regional managing partner in Yorkshire, said: “Inflation is still extremely high, despite the recent fall, and firms in Yorkshire and across the country are facing continued increases in the costs of running a business, as well as the challenges of weakening customer demand and high borrowing costs.

“These blows are now pushing many businesses to the brink and are made harder to cope with by the fact that many firms’ finances are in a vulnerable state as a result of the covid pandemic, followed swiftly by the cost-of-living crisis.

Recent months have seen the closure of a number of high-profile businesses, including Bradford-based Safestyle, which liquidated earlier this week with the loss of around 700 jobs.

September also saw retail chain Wilko enter administration, leading to thousands of job losses and the firm’s 400 highstreet stores closing down.

According to Begbies Traynor’s newly released data, construction, support services (which includes a range of businesses from call centres to conference organisers and funeral providers), and real estate and property services companies were the sectors that saw the highest numbers of Yorkshire businesses in critical distress.

The data also revealed that more than 460 construction firms in the region were suffering critical financial distress, an increase of 65 per cent since Q2 2023.

Support services accounted for 320 critically distressed businesses in Yorkshire, a 24 per cent rise on Q2 2023.

Real estate and property services stood at 302 businesses afflicted by incidences of critical distress, up 32 per cent on the same three months last year.

Sectors including hotels and accommodation and travel and tourism saw distress levels fall on the previous quarter, with the rise in staycation summer holidays boosting both industries.

Yorkshire firms ‘pushed to the brink’ as new data shows rapid rise in number of businesses experiencing distress