STRUGGLING businesses are being urged to seek support as data shows signs that the region's bounceback may be short lived.

There are concerns that 'too many small businesses will go under' as they face serious logistical issues resulting from Brexit and Covid.

The number of financially struggling businesses in Yorkshire fell sharply in the third quarter of 2021, compared to Q2 as a result of the relaxation of Covid regulations in summer - according to the Red Flag Alert data, published by business rescue and recovery specialist Begbies Traynor.

For the three months to September there was a 15 per cent fall in the number of distressed businesses in Yorkshire compared to the previous quarter. However, there had been only a one per cent year-on-year decline compared with Q3 last year before the second national lockdown was imposed in November.

The data reveals that 33,000 Yorkshire firms were displaying symptoms of early-stage or ‘significant’ financial distress in the three months to September, down from almost 39,000 businesses at the end of June.

Significant distress refers to companies with financial problems such as county court judgements (CCJs) of less than £5,000 filed against them.

The UK saw a 14 per cent drop in significant distress compared to the previous quarter, and a one per cent increase year on year.

Begbies Traynor’s figures also revealed a rise in the number of firms displaying the more serious symptoms of ‘critical distress’ which includes having CCJs of over £5,000 filed against them.

In Yorkshire, this was up by 13 per cent on the previous quarter and by 10 per cent year on year. Construction was hard hit, with 38 firms affected, a rise of 52 per cent on Q3 2020 and 19 per cent on the previous quarter.

Julian Pitts, regional managing partner of Begbies Traynor for Yorkshire, said: “The staycation boom and reopening of the hospitality sector have played a significant role in fuelling a welcome rebound in Yorkshire’s economy. We’re seeing bars, restaurant and hotels all benefitting from the easing of most of the remaining Covid restrictions at the height of the summer, when international travel restrictions also largely prevented foreign holidays.

"The multiple challenges of soaring prices and the ongoing scarcity of raw materials, combined with chronic labour and skills shortages, is weighing heavily on businesses across many sectors. Add to this the pressures of escalating fuel costs, severe shortages of lorry drivers and the ensuing supply chain disruption, and it’s clear this is very rapidly becoming a perfect storm for many businesses.

"The worry is that too many small businesses will go under before the Government addresses the serious logistical issues resulting from Brexit and Covid and the chronic increase in critical business distress revealed by our latest figures may already bear this out. Small businesses that are struggling financially should seek professional help now before their situation becomes more serious.”

In Yorkshire, bars and restaurants saw a eight per cent decline in significant distress since Q2 of this year, with 1,660 businesses struggling.

Hotels and accommodation saw a five per cent decrease on the previous quarter, with distress affecting 370 businesses. Despite a 16 per cent drop in the numbers of construction firms struggling with significant financial distress since the previous quarter, 4,600 businesses in the region were still affected.

Red Flag Alert has been measuring and reporting corporate financial distress since 2004, and over that time has become an industry benchmark of the underlying health of companies across every sector and region of the UK.