Yorkshire business distress rising faster than UK average
THE number of Yorkshire companies showing signs of financial distress increased by 10% over the last quarter, as the impact of pubic sector cuts start to hit home.
The number of companies across the region considered to be suffering ‘critical’ or ‘significant’ problems increased to 6,704 for the third quarter of 2011, up 10% from 6,116 in the second quarter, according to figures released today in Begbies Traynor’s Red Flag Alert – a quarterly report which monitors a series of indicators of company distress.
The increase seen across Yorkshire is considerably higher than the average increase of 2% across the UK and the report shows the beginning of a divide between levels of financial distress in the north and the south.
The number of businesses facing both significant and critical financial distress in the past quarter dropped by 6% and 3% respectively for London and the South East, while all other regions in England and Wales faced increased levels of distress.
Hardest hit was the beleaguered North East with a 19% increase in business distress, followed by the North West with a 12% rise.
David Wilson, of Begbies Traynor in Leeds, said: “As the threat of public sector job cuts became a reality in the past few months, a North South divide has begun to emerge with the South East and London showing much greater economic resilience than areas such as Yorkshire.”
“With our heavy dependence on the public sector, it is not surprising that the region is witnessing financial distress growing at a faster rate than in other parts of the UK.”
Business to business support services continued to be the sector hardest hit by ‘significant’ problems with 20% of the total instances of ‘significant’ distress (up from 17% year on year), followed by the construction sector which accounted for 15% of the total, an increase of 2% from the previous year.
Retail saw a rise in ‘significant’ problems from 5% to 7% compared with the previous year, and there was also a 1% increase in ‘critical’ problems in the hotels sector.
“We are starting to see a knock-on effect on consumer spending with sectors such as hospitality and retail being hit by the reduction in discretionary spend,” said Julian Pitts, also from Begbies Traynor’s Leeds office.
“Unfortunately, the loss of contracts and jobs resulting from the public sector spending cuts will be felt for some time to come.”
