Almost 46,000 firms across Yorkshire were experiencing ‘significant’ financial distress in Q2 2025, up 14.5% on the previous quarter and 9.5% on the same time last year, according to the latest Red Flag Alert research from Begbies Traynor.
While the region isn’t alone, with UK-wide distress levels up 15.1% quarter-on-quarter and 10.8% year-on-year, affecting more than 667,000 businesses nationally, the figures highlight the pressure building across Yorkshire’s key sectors.
In Yorkshire, six of the 22 sectors tracked showed double-digit year-on-year increases in early distress. Among the hardest hit were real estate and property services (+26.6%), professional services (+22%), support services, which includes a range of businesses from hairdressers to vets to funeral parlours (+14.7%), and hotels (+14.3%).
By contrast, some sectors in Yorkshire showed signs of resilience. Printing and packaging (-34.9%), travel and tourism (-14.1%), and industrial transport and logistics (-12.8%) all saw levels of distress fall compared with the same quarter in 2024.
Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “Across the region we’re seeing mounting financial pressure on businesses, many of whom are being squeezed from all sides. The rise in employers’ National Insurance contributions has pushed up the cost of employment, while energy costs, borrowing costs, and input prices remain stubbornly high.
“For SMEs, these increases are hitting at a time when demand remains patchy and long-term planning is difficult. Many firms are finding themselves in a precarious position: not yet in serious trouble, but starting to show the early warning signs of distress.”
The latest warning comes amid a mixed economic picture. UK GDP fell by 0.1% in May, inflation rose unexpectedly to 3.6% in June, and while manufacturing output is improving, the Bank of England has continued to hold off on cutting interest rates – keeping the cost of borrowing high for businesses.
As well as rising early-stage distress, some 3,400 Yorkshire businesses were in critical distress in Q2 – a 6.8% increase on the previous quarter, and 25.1% up year-on-year. This trend was mirrored nationally, with an 8.6% quarterly rise and 21.4% annual increase in critical distress cases.
Some Yorkshire sectors, however, saw year-on-year drops in advanced distress, including travel and tourism (-62.5%), hotels (-37.5%) and food and drink production (-28%).
Julian added: “The underlying message is clear: there’s a growing cohort of businesses under pressure, and unless conditions improve, we could see more tipping into serious trouble over the months ahead.
“Employment costs are now materially higher, particularly for labour-intensive industries. And with energy prices set to rise again and household budgets already stretched, we expect continued pressure on consumer-facing sectors.
“Our message to business owners is simple – if the warning signs are there, act early. There are more options available to restructure or recover a business at the early stages than when a crisis point is reached.”
Begbies Traynor’s Red Flag Alert has monitored early and critical distress levels among UK businesses for nearly 20 years, using a range of legal, financial and trading indicators.
