Performance of Yorkshire’s food and drink sector raises a red flag
LEVELS of very serious or “critical” business distress in Yorkshire fell faster than the UK average in the final quarter of 2014, according to Begbies Traynor’s latest Red Flag Alert research.
However the positive message for the region was tempered by Yorkshire’s increasing instances of less serious ‘significant’ financial distress, which are rising more quickly than the national average, with the region’s food and drink sector most severely affected.
The intensifying battle among the supermarkets for the lion’s share of consumers’ food budgets is taking its toll on suppliers in the food and drink sector.
Year on year, “significant” business distress in Yorkshire’s food and drink manufacturing sector soared by 108% at the end of last year, with 127 companies struggling to make ends meet, compared to 61 at the same stage last year.
Yorkshire food retailers themselves are also bearing the brunt of tightened consumer purse strings. The sector saw an annual increase of 38% in ‘significant’ distress to Q4 2014, affecting 380 businesses, compared with 276 in Q4 2013. The trend was reflected nationally with a UK average 58% increase in food retail business distress year on year.
Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “The supermarket price war is intensifying and it looks like some of Yorkshire’s food suppliers are bearing the brunt.
”A perfect storm is brewing for SME food suppliers at the bottom of the food supply chain, with many suffering a double hit from larger suppliers demanding ‘loyalty’ payments as well as vanishing margins as a result of the inevitable aggressive supermarket price war.”
He added: “Unless the supermarkets start treating their suppliers more fairly and find longer-term solutions to their cost cutting exercise, we expect that across the UK more than 100 food and beverage suppliers could fall into administration before the year is up. Worryingly, with Yorkshire generating 12.5% of the UK’s food and drink turnover, the economic risks associated with the current price war stand to take a particularly heavy toll on our region.”
The final quarter of 2014 saw 14,829 instances of ‘significant’ business distress – often an early warning sign of more serious financial problems to come – across all sectors in Yorkshire. The figure was up 7% on Q4 2013, compared to a national average fall in ‘significant’ distress of 5%.
The 168 Yorkshire companies displaying symptoms of “critical” distress – which can include CCJs totalling more than £5,000, winding-up petitions and CVAs – represented a 30% decrease on the final quarter of 2013 and was 15 per cent lower than the previous quarter.
