Yorkshire businesses see an increase in financial distress ahead of the General Election

Yorkshire businesses are not investing into growth or expansion, putting a hold on recruitment and pay rises until the outcome of the General Election next month.

Begbies Traynor, business recovery specialists, recently warned that this has caused stagnation across all areas of the economy.

Begbies Traynor’s Red Flag Alert research for Q1 2015, which monitors the financial health of UK companies, reveals that levels of ‘significant’ financial distress among businesses in Yorkshire fell by just 1% over the past three months to 14,737 (Q4 2014: 14,829).

Levels of more severe ‘critical’ distress increased slightly by 5% to 177 failing companies (Q4 2014: 168).

The sector that is suffering the most due to the tightened consumer budgets is the region’s food and beverage manufacturing industry. Companies in this sector, many of which supply the major supermarkets, are constantly seeing escalating ‘significant’ distress with 129 Yorkshire businesses now struggling to stay afloat, compared to 66 at the same stage last year; which is a 95% increase.

Yorkshire food and drug retailers also witnessed a 37% increase in ‘significant’ distress, from 286 companies affected in Q1 2015 to 392 in Q1 of this year.

Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “Concerns over the outcome of the most uncertain election in a generation have led to a state of stagnation across all sectors of the economy. Swathes of businesses in Yorkshire have postponed their growth plans until after the results have been announced.

“With economic forecasters predicting that political uncertainty would result in a fall in consumer confidence and sharp swings in the value of the pound, many business leaders in Yorkshire and across the UK took the decision at the start of the year to cut back on much needed investment, new hires and pay increases to provide a buffer in the event that trading levels subsided. Fortunately these concerns seem to have been overly cautious, as the economic impact of the election has so far been minimal.”

Mr Pitts added: “The four main UK supermarkets are continuing to cut prices as a core component of their turnaround strategies and these mass price reductions are having severe consequences for less established food retailers and suppliers in Yorkshire, particularly SMEs, who now seem to be locked in a David and Goliath-style battle; although this time it appears David can’t win.”

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