New research from insolvency body R3 has found that consumer spending has fallen across the last three months across the UK. In Yorkshire, in particular, consumer-facing sectors such as hotels, restaurants, pubs and retail are at a higher risk than normal of insolvency.
The number of hotels above normal risk in August stood at 19.5%, a growth of 4% whilst retail businesses struggled with 26.2% currently at risk, 0.9% worse than the national average of 25.3% for this sector. This percentage represents around 3,500 of the 13,300 active retail businesses in the Yorkshire area.
Pubs in the area increased their risk by 2.3% whilst restaurants did better with only 1.4% falling into the high risk category but this puts the restaurant sector in Yorkshire, currently at 23.5%, 0.4% above the national average of 23.1%.
Many industries grew their risk levels over the course of the last three months from manufacturing to professional service, tourist operators to construction. It was agriculture that bucked the trend as only 19.2% were deemed at risk in comparison to the 21.3% of national businesses which are at risk of insolvency.
As a result, Yorkshire was deemed to be at higher risk than normal of insolvency with a month on month rise of 3.4%. Chair of R3 in Yorkshire and restructuring partner at Deloitte LLP, Adrian Berry, commented on the findings; “While levels of businesses at risk in Yorkshire generally seem to be in line with the national picture, it is concerning to see distress creeping up throughout the UK and across most sectors, with businesses dependent on household spending being hit the hardest.
“A recent survey from payments company Visa found that UK consumer spending had fallen for the third consecutive month, providing further evidence that people are feeling the impact of wage freezes and growing inflation. As ever, our advice is for businesses to keep a close eye on their finances and seek professional advice at the first sign of trouble.”
These figures from R3 were released at the same time as research from Ortus Secured Finance which found that income for many of the UK’s biggest nightclubs are down for the fourth year in a row. This is as a result of people turning increasingly to bars rather than heading to nightclubs for their nights out.
The top 100 nightclubs in the UK have seen a 5% turnover drop in the past year making 2016/17, the fourth successive decline since 2013/14. Jon Salisbury, managing director of Ortus Secured Finance, commented on the last figures; “The decline of the nightclub sector shows no signs of ending, and that’s hugely worrying for a key part of Britain’s night-time economy.
“Nightclubs can still be a very profitable enterprise, so long as they’re able to keep up with what the market expects from them – a dated nightclub is often a failing nightclub.”
As the number of late-night bars and pubs grow, due to the Licensing Act of 2005 which allows more venues to stay open later, people are increasingly heading to bars and pubs for a usually cheaper and calmer experience.
So while consumer spending is down, which is affecting all the businesses mentioned above, new research out today shows the cost of living squeeze is as a result of inflation not necessarily their household bills.
MoneySavingExpert found that household bills are rising more slowly than the rate of inflation which suggests that some elements of the cost of living squeeze may not be as severe as first thought. The rise in the total cost of household bills is less than the inflation rate as household costs such as rent, energy bills and council tax have risen by 2.1% in the last year.
The rise in bills is around the same as the average earnings growth but is significantly lower than the inflation rate which came in at 2.6% in July. Although when put together household bills rose by a smaller percentage than many initially thought they would, the average cost of insurance rose by 7.6% and energy bills have risen by 5.1%.
These rises have hit some households hard as they are well above inflation and unless people look into switching providers, they are likely to have seen steep rises in their monthly bills. Managing director of MoneySavingExpert Guy Anker has reiterated that consumers could save considerable amounts of money by switching providers.
Although, inflation is expected to ease towards next year, wages are still falling in real terms as prices grow on many everyday items due to inflation and a weak pound which is pushing up import costs. As household budgets continue to be squeezed, even if it is just for the short term, it is having an effect on businesses across the country especially those in the services sector, as the new research from R3 shows.
It definitely seems like the next few months will be tough on businesses and households alike, both of which will be hoping for the economy to stabilise. Until then, households and businesses will be looking to cut back spending and make the most of the money they have in a slightly unpredictable market.
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