Business distress across Yorkshire has surged by 29% since the end of 2019, with more than 38,000 of the region’s firms now in financial trouble – a year-on-year increase of almost 9,000 businesses.
Distress levels had also soared by 14% since the previous quarter, with a further 4,600 companies plunged into distress.
The latest Red Flag Alert research, for Q4 2020, has recorded ‘significant’ distress affecting 630,000 businesses across the UK, a 27% year-on-year increase nationally, with London experiencing a 33% rise in distress since Q4 2019.
The research, from Begbies Traynor, also found that, in Yorkshire, every single one of the 22 sectors monitored by Red Flag Alert displayed a double-digit increase in ‘significant’ distress year-on-year, ranging from an 18% to a 45% rise.
The picture was similarly bleak UK-wide, despite the Government’s package of interim COVID financial support measures.
In Yorkshire some of the worst hit sectors were financial services (with distress up 45% year on year and 28% on Q3 2020), travel and tourism (up 40% year on year and 21% quarter on quarter) and property (up 39% year on year and 18% on the previous quarter).
However, it is likely that the distress figures revealed by the Begbies Traynor research are the tip of a very large iceberg.
The coronavirus pandemic has reduced court activity, limiting the number of CCJs and winding up petitions being issued against indebted companies, and there has been a ban on winding up petitions for covid-related debts.
Data shows that, nationally, there were 14,030 CCJs lodged against companies during October, November and December in 2019, with only 9,716 lodged during the same period in 2020, a fall of 31%.
The situation is even more acute with regard to more serious winding up petitions. During October, November and December 2019, 644 were lodged compared to just 94 during the same period in 2020, a fall of 85%.
“The pandemic meant that 2020 was a devastating year for thousands of businesses as they fell further into financial distress and Q1 2021 seems to be offering little hope of an upturn,” said Julian Pitts, Begbies Traynor’s regional managing partner for Yorkshire.
“The Government’s extended furlough and financial support measures will provide some relief and should save a significant number of businesses from entering into insolvency in the short term.”
He added: “Unfortunately though, for many struggling companies, Government financial help will provide little more than a stay of execution as debt levels become unmanageable and structural changes across many sectors take their toll.”