Yorkshire out of recession claim at odds with business failure figures

CONFLICTING reports over whether the region has moved out of recession have been published today.

According to research by the Chartered Institute of Purchasing and Supply, which is based on purchasing managers indices (PMIs), said Yorkshire moved out of recession in June.

The survey, conducted by Markit, revealed a rise in activity for the first time in more than a year and business growth despite steep job losses.

It showed a rise in private sector output in June with the seasonally adjusted business activity index – which measures the combined output of the region’s manufacturing and service sectors – posted 52.6 up from 47.8.

The data revealed a marked improvement since April 2008 and was marginally higher than the UK average.

Markit said that anecdotal evidence and the data implied increased activity was principally work on existing contracts and the recommencement of delayed projects.

New business fell modestly last month but compared to record rates of contraction seen at the end of 2008, Markit said that the latest data on new orders represented “relative consolidation” of market conditions.

However, prices showed continued deflation with input costs falling back on reduced steel, chemicals and packaging prices.

Average prices paid for inputs have now fallen to eight successive months.

Average output charges fell for a seventh month due to discounting.

Commenting on the results, Paul Smith, senior economist at Markit said: “The latest data suggest that the recession in the region came to an end during June.

“Despite being a clear improvement on the situation seen at the end of 2008/early 2009 there are some questions over the sustainability of recovery.”

Meanwhile, Begbies Traynor’s quarterly red flag alert report showed that all sectors were continuing to suffer from increases in distress levels compared to a year ago.

The report by the rescue, recovery and restructuring firm showed that the number of businesses in serious trouble remains close to record levels.

The second quarter saw 11,887 Yorkshire companies showing significant problems (defined as companies with either a court action and/or average, poor, very poor, insolvent or out of date accounts) – up 79% on the same quarter 2008 but down 3% on the first quarter.

Yorkshire businesses experience almost twice the national average (43%) increase in significant problems.

In addition, a total of 421 companies were facing ‘critical’ problems (defined as those with CCJs totalling over £5,000 or Winding-Up Petition related actions) in the first quarter of 2009 – an increase of more than 202% on the same period the previous year when the total was just 139.

This measure also shows a huge increase of 77% on the previous quarter when the number was just 238.

The construction (27%), property services (10%), manufacturing (10%) automotive (10%) and engineering (7%) sectors showed the largest proportion of businesses with the most serious problems together accounting for close to two thirds of all ‘critical’ businesses.

Julian Pitts, partner at Begbies Traynor in Leeds said: “Property and construction continue to be the hardest hit sectors with over a third of all the critical businesses working in these areas.”

“Yorkshire also remains one of the country’s hardest hit region’s when compared year on year, this may however be a result of the downturn hitting us here later than other parts of the country.”

He added: “The national figures for business distress have shown slight falls from the last quarter, but also remain at near record levels.”