Number of Yorkshire firms facing 'critical financial distress' up by a third

A spokesman said: “The figures also highlight the speed with which severe distress is increasing in Yorkshire. The region had suffered an even more pronounced increase than the UK as a whole, which recorded a 25.9 per cent climb in critical distress since Q3 (the third quarter) 2023 and a 2.6 per cent year-on-year increase.

According to Begbies Traynor’s report, less severe or “significant” distress was also increasing and had risen by 13.1 per cent in Yorkshire since the end of Q3 2023 (12.9 per cent across the UK) and 9.2 per cent since Q4 2022 (5.6 per cent across the UK).

Julian Pitts, Begbies Traynor’s regional managing partner in Yorkshire, said: “Critical distress refers to businesses that have county court judgements of more than £5,000 against them, which is often a precursor to them ceasing to trade.

“The fact that the number of businesses facing this kind of very advanced distress has risen by almost a third in just three months here in Yorkshire, and by more than 25 per cent across the UK economy, is perhaps another sign of the fact that businesses that had taken on debt when interest rates were low, and were supported through the pandemic by the Government, are now having to deal with the current reality of high interest rates.

He added: “Combined with high inflation, which is triggering rising wages and material costs, and weak consumer confidence, unfortunately many of these businesses may be heading towards insolvency and should seek professional advice, if they can, to avoid the worst happening before it is too late.”

Yorkshire’s construction industry recorded the region’s highest number of critically distressed firms at the end of last year according to the Red Flag Alert data, at 604 and up by 30.7 per cent since the previous quarter.

Real estate and property services firms facing severe distress numbered 409, an increase of 35.4 per cent on Q3 2023, while professional services, which includes accountants, solicitors and architects, saw a 51.5 per cent increase in critical distress, affecting 256 businesses.

Julie Palmer, a partner at Begbies Traynor, said: “Now that the era of cheap money is firmly a thing of the past, hundreds of thousands of businesses in the UK, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances.”

She added: “For some, a better-than-expected Christmas may kick these concerns down the road for a little longer, but the rapid growth in the levels of critical financial distress point to an economy that is waking up to the danger of debt-laden businesses in a higher rates environment.

“Sadly, for tens of thousands of British businesses who should be looking ahead to 2024 with some degree of optimism, the new year will bring a fight for survival as the debt storm that has been brewing for years looks like it is breaking across the country.”