As the Government prepares to withdraw economic support measures from hard-pressed businesses after the ending of Covid restrictions on 19 July, early financial problems among firms in Yorkshire, and the rest of the UK, have continued to rise and were up by 24% in the region in the second quarter of this year, compared with the same period last year.
According to the latest Red Flag Alert data, published today (28 July 2021) by leading independent business rescue and recovery specialist Begbies Traynor, the number of businesses showing early-stage, or ‘significant’, symptoms of financial distress had risen by 24% since Q2 last year, affecting 39,000 firms in Yorkshire. However, Q2 of 2021 also saw a 9% fall in distressed companies compared to the first three months of the year, as lockdown restrictions began to loosen and the hospitality sector was permitted to reopen.
Nationally, the picture was similar, with a 24% year-on-year rise in early business distress affecting over 651,000 firms, and a 10% quarter-on-quarter drop.
Julian Pitts, Begbies Traynor’s regional managing partner for Yorkshire, said: “While it is reassuring that we have not seen the flood of insolvencies many were anticipating, the pressure on business continues to mount and the fear is that it could reach a crisis point when the Government’s Covid support measures are phased out in the autumn.
“A generally supportive environment, which has included the Government’s own business lifelines, as well as forbearance from banks and other institutions, has combined with a backlog of court cases to stave off judgment day for many indebted businesses.
“The complex financial impact of the pandemic, combined with the increasingly difficult trading environment created by Brexit for countless firms, look set to add up to a perfect economic storm and it’s important that owner-managers seek early expert advice in order to survive the ongoing turbulence.”
The past 12 months has seen a double-digit increase in ‘significant’ business distress across almost every business sector in Yorkshire. Among the worst hit has been real estate and property services which now accounts for more than 4,400 distressed firms in Yorkshire alone, a 36% rise on Q2 last year.
The construction industry, hit by a triple whammy of staff shortages, scarcity of materials and rising prices, is also struggling, with more than 5,400 firms affected in Yorkshire, a 24% rise on the numbers of distressed business in the sector in Q2 2020. Travel and tourism has also been predictably badly hit by the pandemic, with 37% more businesses in financial trouble than in 2020.