Concerns Raised Following Release Of New Research

The number of businesses in Yorkshire and the Humber reporting signs of distress remains significant although it is below the national average, according to research by R3, the insolvency trade body.
 
Nineteen per cent of businesses in the region admit to regularly using their maximum overdraft facility, compared with 30% across the UK.  However, 35% of businesses in the region say they are experiencing reduced sales volumes, close to the national figure of 37%.

Andrew Walker, chair of R3 in Yorkshire and partner at Irwin Mitchell, comments: “While businesses in the region seem to be faring better than in some parts of the country, many are still reporting signs of distress and yet we have not seen the number of corporate insolvencies we would expect. This could be down to a number of factors but will certainly have been influenced by a shift in creditor attitudes.  With the realisation that economic recovery is still not on the horizon, creditors – including HMRC and the banks – have been giving businesses ‘Time to Pay’ on their taxes and more breathing space to settle their debts.

“But why then are so many businesses reporting distress? Well, regardless of the sympathetic attitudes of creditors, consumers’ disposable income has shrunk, confidence is at rock bottom and the impact of this is bound to be felt.  Suppliers and investors are also reluctant to take the plunge and support businesses perceived to be struggling so we are seeing more and more suffering but this is not manifesting itself in business failures.”

In Yorkshire and the Humber, 43% of businesses said that they were experiencing decreased profits; 32% reported a recent fall in market share; and 16% had had to make redundancies.  However, there were some encouraging signs with 22% of businesses in the region investing in new equipment and 21% saying that their business is expanding.

The research also highlighted that throughout the UK more retailers are suffering across three out of the five distress signs. Most notably, half of retailers reported reduced sales volumes and decreased profits compared to a cross sector average 37% and 36% respectively. Furthermore, when R3 members were asked to choose which sector they think will experience the greatest number of insolvencies in 2012, 50% chose wholesale and retail above other sectors.

Andrew Walker continues: “The retail sector is in a state of flux. Retailers live or die on the back of the consumers’ spending power and the likes of Game, Peacocks and La Senza show us that the consumer can be fickle. Furthermore, 18 million people are worried about their current level of debt and this is undoubtedly having an impact on their discretionary spending, together with increases in the costs of basics such as food and heating.

“The high street is changing, as are consumer spending habits and as out-of-town and online shopping becomes increasingly popular, these findings indicate that many retailers are not keeping up with the pace.”