Yorkshire’s business health rated "critical"
THE number of Yorkshire companies in a “critical” financial condition has increased, according to figures published by Begbies Traynor.
Research by the business rescue, recovery and restructuring specialist showed that more than 450 companies across Yorkshire and the North East were feeling the effects of the ongoing economic turmoil Q3 – a whopping 485% year-on-year increase.
The number of companies in the region rated as “critical” – that is those with county court judgements (CCJs) totaling £5,000 or more and/or wind-up petition related actions – during Q3 was 451 compared to only 77 a year ago.
Indeed, as the credit crisis deepens the outlook for companies in the region has worsened since last quarter with the number of critical companies increasing by 11.4% in Q3 compared with Q2.
Begbies Traynor’s Red Flag Alert statistics reveals a worrying picture across the UK with a staggering 4,566 firms classed as critical in Q3 compared to 791 for the same period 2007.
Moreover, the number of companies with “significant” problems – that is those with a court action and/or average, poor, very poor or insolvent or out dated accounts – has nearly doubled from January to the end of September to 58,564 signalling a 250% increase.
David Wilson, a partner at Begbies Traynor in Leeds, said that September had clearyl been the worst month so far for UK business.
“The effects of recent market volatility, coupled with the second year effects of the credit crunch conditions, have clearly taken their toll,” he added.
“With twice as many companies now experiencing significant problems, we expect to see an even further increase in ‘critical’ business problems as distress escalates over the next year.”
Mr Wilson said that stricter lending criteria and an inability to secure funding meant that businesses which might have relied on additional credit to see them through a temporary downturn no longer had that option.
He continued: “Unfortunately, the advent of stricter lending criteria comes at precisely the time when the trading prospects for UK companies are deteriorating rapidly, and when the extreme level of market uncertainty makes writing business plans to support funding options extremely challenging.”
It may be of little comfort but Yorkshire is not the worst region affected. Firms in the South East and East Anglia have five times the number of “critical problem” classed firms than in Q3 2007.
In terms of percentage increase in companies classified as “critical”, the East Midlands witnessed the highest increase with a rise of 772%, which was followed by the West Midlands with a 503% increase followed by the North East.
Red Flag Alert measures corporate distress signals within factual legal and financial data drawn from a wide range of relevant sources for incorporated companies that have been trading for more than a year with assets in excess of £10,000.
