Rising tide of financial distress pushes businesses to the brink in Yorkshire and across the UK

The report for Q4 2024 reveals that ‘significant’ or early-stage business distress had climbed rapidly, affecting 46,000 businesses in Yorkshire and 655,000 business across the UK by the last three months of last year. In Yorkshire, the number of companies with financial problems had increased by 23% since the same quarter in 2023 and by 4.2% since Q3 2024. For the UK, it was a similar picture, with ‘significant’ distress up 3.5% on the previous quarter and 21.3% higher than Q4 2023.

With increases in significant distress across every industry in Yorkshire year-on-year, the region’s food and drink sector was particularly hard hit. Despite some signs of a pre-Christmas sales boost which saw falls in the number of distressed businesses of 11.5% for food and drug retailers and 6.5% for food and drink producers, year on year the sector was hit by a surge in distress. Food and drug retailers saw a 44.5% rise, while in food and drink production significant distress was up by 34.6% compared to Q4 in 2023. General retail was also hit by a year-on-year 34.3% rise in distress.

According to the latest Begbies Traynor figures, other sectors in Yorkshire facing challenges included hotels and accommodation, where distress had risen by 10% since Q3 of 2024 and by 42.2% year on year. Despite an 8.7% quarter-on-quarter drop in significant distress, bars and restaurants also saw a year-on-year hike of 28.7%.

The construction sector in Yorkshire continued to hold the highest number of distressed businesses. At 7,458, that number had grown by 17.7% year on year and by 7.7% since the previous quarter.

Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “Unfortunately, the fact that we are seeing unprecedented numbers of businesses across every sector of the economy struggling with the multiple challenges they face, and falling victim to financial distress, is extremely concerning.

“As we start a new year it is natural to look for some reasons for optimism, however the outlook for 2025 does look worryingly bleak as businesses face the prospect of escalating costs with rising operational costs and higher wages adding to an already difficult situation.

“This will only be compounded by the tax rises and increase in the national minimum wage levied on businesses in the Autumn Budget, placing yet more financial strain on businesses later this year, especially in labour-intensive sectors like retail and hospitality which generally operate on very narrow profit margins.”

He added: “As ever, it is the army of small, owner-managed businesses that make up the backbone of the economy who, pushed to the brink, are least able to withstand prolonged periods of financial insecurity. Our advice is always to seek professional advice as early as possible to ensure the best chance of future proofing your business.”