Red Flag alert finds business positives for Yorkshire

THE number of Yorkshire companies in distress has fallen by 20% year on year, according to new economic data.

However, in its latest Red Flag update, business rescue, recovery and restructuring specialist Begbies Traynor said the UK economy remains fragile with 9,534 companies in the region experiencing ‘significant’ financial distress in the second quarter of 2010.

The update, which monitors the warning signs of companies in distress, found there were more than 127,500 companies in the UK experiencing significant or critical financial problems, between them owing over £65.5bn to creditors, suppliers and service providers. 

The fall in distress in Yorkshire was not as marked as the rest of the country which showed a fall of 31% for the same period the previous year, but remained at historically high levels.

The sectors worst affected in Yorkshire remain construction (16%), B2B services (16%) and property services (9%). 

However, there were positive signs for the region with some improvement in manufacturing.

David Wilson, of Begbies Traynor in Leeds, said: “Although these figures suggest that the economy is steadying, there remains a high degree of uncertainty. Many businesses in the region are likely to be affected by cuts in public spending and this could prove another blow for the struggling construction industry. 

“Capital investment remains sluggish and this lack of confidence is compounded by the turmoil in the Greek economy and its possible knock on effect on the Euro zone as a whole which could cause further market unrest and sterling depreciation.”

Julian Pitts, also from the firm’s Leeds office, added: “Although the decrease in distress both quarter on quarter and year on year is a positive sign, our experience of previous recessions together with some of the forthcoming pressures on the economy reinforces our view that the recovery phase often represents the greatest challenge to vulnerable smaller companies and we expect levels of insolvency to rise again in 2011.”

Red Flag also revealed that the last three months marked the third consecutive quarter of increases in the number of problem companies.