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Businesses in the Humber region and across the country are being warned to expect severe financial difficulties as record-high inflation and rising wage costs are set to compound the recession and worsen economic prospects for the year ahead.

Smaller businesses are seen as at the highest risk of financial collapse, according to the latest Red Flag Alert data, published today.

Leading independent business rescue and recovery specialist Begbies Traynor, the company behind the analysis, said business distress had flatlined in the final quarter of 2022, with buoyant pre-Christmas retail sales, the World Cup and government support for energy costs helping to boost the high street and the wider economy.

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Some 1,561 Humber companies suffered early stage financial problems, such as having county court judgements of less than £5,000 served against them, in the last three months of the year, 1 per cent less than in the previous quarter and 2 per cent up on the final quarter of 2021.

Nationally, more than 610,000 businesses suffered ‘significant’ distress, equal to the previous period.

Andrew Mackenzie, partner at Begbies Traynor in the Humber region, said: “Unfortunately, despite some pre-Christmas consumer optimism, Britain is now mired in what looks certain to be at least a year-long slump, driven by rising prices and escalating business costs that are putting the brakes on economic activity. Rising wages, widespread strike action and supply chain disruption are also causing headaches for swathes of businesses.

“The government’s plan to cut support to most businesses for their energy bills from April will compound the reined-in consumer spending and ensuing slowdown in demand that is now very likely to cause widespread and serious financial problems, particularly for smaller businesses, across the Humber region and beyond.”