A RISING tide of financial distress is continuing to engulf businesses in Yorkshire and across the UK, despite forecasts the country is set to emerge from recession.

High interest rates and supply chain issues remain persistent problems for many businesses in Yorkshire facing financial problems had increased by over a third in the year to Q1 2024, according to the latest Red Flag Alert data from leading independent business rescue and recovery specialist Begbies Traynor.

The report found that in Q1 of this year, early-stage or ‘significant’ financial distress had risen by 36 per-cent in Yorkshire since Q1 2023, affecting 38,000 businesses in the region.

The region’s economy fared slightly worse than the UK as a whole, which saw a 31 per-cent increase in significant distress in the same 12-month period.

Very severe, or ‘critical’ business distress, which puts companies in imminent danger of insolvency, had also risen by 33 per-cent since Q1 of last year, affecting 2,800 businesses in the region.

The retail sector was one of the worst affected by increasing distress, impacted by both inflation and the decimating effect of the cost-of-living crisis on consumer spending.

Julian Pitts, Begbies Traynor’s regional managing partner in Yorkshire, said: “Persistently high interest rates continue to pile pressure on beleaguered businesses who are struggling with the costs of servicing debts, at a time when reduced consumer demand is exacerbating financial strains.”