Insolvency risk for hotels, restaurants and retailers rises

Consumer-facing sectors in Yorkshire, such as hotels, restaurants, pubs and retail, all saw rising levels of businesses at higher than normal risk of insolvency in August.

Research from insolvency body R3 says this reflects other recent data which indicate that consumer spending has been falling for the last three months across the UK.

According to the latest research by R3, in August the number of hotels in the region at above normal risk grew by 4%, taking the figure to 19.5%, or almost one in five hotels.

This is slightly better than the national average of 20.6% at risk.  Retail also struggled with 26.2% of shops in Yorkshire at higher than normal risk, representing nearly 3,500 of the 13,300 active retail businesses here. This was marginally worse than the UK-wide level of 25.3% of retailers at risk.

Pubs in the region saw a 2.3% increase in those at above normal risk (now 21.6% compared with 22.3% across the UK); while restaurants fared slightly better with a rise of just 1.4% since the previous month (now 23.5%, compared with 23.1% nationally).

Yorkshire was close to the national average levels of businesses at risk in most other sectors including manufacturing, technology and IT, construction and professional services.  The only sectors in which the region underperformed compared with other regions was tourist operators (30.6% at risk in the region compared with a UK average of 28.6%); and transport and haulage (43.7% of businesses in the negative band here, significantly above the UK-wide average of 33.5%).  However, the region continued to perform strongly in agriculture with just 19.2% at risk compared with 21.3% nationally.

Overall, more than 63,000 businesses in Yorkshire were deemed to be at higher than normal risk of insolvency, a month on month rise of 3.4% bringing the level to 28.9% of active businesses in the region, slightly above the national figure of 28.3%.

Adrian Berry, chair of R3 in Yorkshire and restructuring partner at Deloitte, said:
“While levels of businesses at risk in Yorkshire generally seem to be in line with the national picture, it is concerning to see distress creeping up throughout the UK and across most sectors, with businesses dependent on household spending being hit the hardest.  A recent survey from payments company Visa found that UK consumer spending had fallen for the third consecutive month, providing further evidence that people are feeling the impact of wage freezes and growing inflation.

“As ever, our advice is for businesses to keep a close eye on their finances and seek professional advice at the first sign of trouble.”