Member Article

Yorkshire property and hospitality firms suffering financial distress as consumer spending weakens

A slowdown in consumer spending is causing many of Yorkshire’s property, leisure and hotel businesses to slide into financial distress, according to new research from Begbies Traynor, the UK’s leading independent insolvency firm.

Begbies Traynor’s latest quarterly Red Flag Alert data, which monitors the health of UK companies, found that 29,067 businesses in Yorkshire were experiencing ‘significant’ financial distress at the end of June 2019, up 2% since June 2018.

According to the research, the average debt of an insolvent company had more than doubled to £66,226 a year, from £29,872 in 2016.

In Yorkshire, as across the country, businesses reliant on consumer spending are being hard hit, as consumer sales for June 2019 fell to their weakest since records began in 1995.

The region’s property sector has been significantly affected by consumers’ reluctance to spend, with a 12% rise in ‘significant’ financial distress from Q2 2018 to Q2 2019 affecting a total of 2,797 real estate and property services firms in Yorkshire.

Sport and health clubs also saw a 13% rise in distress year on year, with 650 businesses in financial trouble, while hotels saw a 7% climb in distress levels since Q2 2018, with 311 companies experiencing difficulties. Bars and restaurants also felt the effects of weak consumer spending: 1,267 were affected, a 3% year-on-year rise.

Sectors faring better in Yorkshire included printing and packaging, which saw an 8% decrease in distress year on year and a 4% drop since Q1 2019. Retail was also less negatively affected than other consumer-facing sectors, with general retail seeing a 1% year-on-year drop in distress to 2,032 businesses and food and drug retail remaining stable at 884 firms.

Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “The unfortunate cocktail of a consumer spending slowdown combined with the political and economic paralysis of an uncertain Brexit outcome is hitting local businesses hard.

“Yorkshire SMEs are the backbone of the region’s economy and especially in the beleaguered property, hotels, hospitality and leisure sectors. For smaller companies that are already hard pressed, increasing debt levels can often be the final straw that leads to very serious problems indeed. I’d advise all SMEs to keep a very tight control on cash flow and to seek advice sooner rather than later if they are experiencing financial problems.”

This was posted in Bdaily's Members' News section by Emma Kilmurray .