Many Yorkshire-based companies found life tough in 2006, with more than the UK average going to the wall. Nevertheless, there were still success stories to be found.

Spice plc is a success story in Yorkshire, making four acquisitions in the past year. But elsewhere increasing numbers of companies are finding life much tougher.

It is the stuff that entrepreneurs’ dreams are made of. When support services business Spice plc was created in 1996 following a £3 million management buy-out from Yorkshire Electricity the company only managed one contract. But more than a decade on, Spice is listed on AIM with a market cap of some £260 million.

Leeds-based Spice has achieved this through organic development accelerated by acquisitions. Indeed, the company is one of the more acquisitive in the Yorkshire and Humberside region.

In 2006 alone, Spice completed four acquisitions; electrical services providers Baineport Engineering Services Ltd and Maintenance and Technical Services Ltd, ventilation and air conditioning systems designer and manufacturer Breval Technical Services Ltd and energy management business Ineco Holdings Ltd. Each of these deals was for between £2.1 million and £11.8 million.

There is also no question about Spice growing beyond its means – the company recently posted pre-tax profits of £7.4 million, up 42% on the previous year.

Another company on the acquisition trail in the past 12 months was Goole-based car repair business Just Car Clinics, which added several more sites to its portfolio as part of its three-year growth plan.

Spice and Just Car Clinics are indicative of Yorkshire-based companies hitting the acquisition trail during the past 12 months; most deals were completed by small to medium-sized businesses.

Deals such as Goole-based chemicals manufacturer Croda International plc’s £410 million reverse takeover of Uniqema, a Dutch division of ICI, were few and far between, with hardly any others broaching the £100 million barrier.

But Yorkshire-based companies were not only focused on developing via acquisitions in 2006; several companies also joined AIM. One of the larger admissions was Halifax-based SSP Holdings, the holding company of Software Solutions Partners Ltd, which provides IT systems and services for the UK insurance sector.

SSP raised £31 million on its debut in October and had a capitalisation of some £70 million. Since then, its share price has climbed from 98p to 122.5p, helped by a promising set of interim results in December. The company had moved into the black with a net profit of £1.5 million for the six months ended September 30, 2006, compared with a £500,000 loss in the first half of 2005.

Above average failures

But other businesses have not fared so well. The number of companies going bust in Yorkshire and Humberside increased by 5.2% last year compared with 2005, according to the Equifax Business Failures Report for 2006.

Yorkshire was by no means the worst region for business failures. Indeed, only London and the Northwest had smaller increases in insolvencies, while just the Northeast and Northern Ireland reported a fall in failures in 2006.

Despite this, Yorkshire’s figures were more than 1% higher than the national average for failures in 2006, demonstrating how several businesses found trading conditions tough throughout most of the year.

But there are signs that 2007 may be better for the region’s businesses. Insolvencies were down 9.6% in the final quarter of the year compared with 2005, indicating that economic conditions may be improving.

This is borne out by economic figures from The Royal Bank of Scotland’s regional PMI report. In the final quarter of 2006, output rose markedly in Yorkshire, although it still lagged behind the UK average.

This was a positive end to an inconsistent year for the region. “PMI data over 2006 suggest that the Yorkshire & Humberside economy… had a mixed year,” said Matthew Smith, RBS economist.

Smith noted that while business activity was robust and improved on 2005’s figures, the region faced some of the sharpest rises in input costs, with employment levels falling throughout the year.

But despite this, Smith is still relatively upbeat about the region’s prospects in 2007. “December’s PMI data show that the Yorkshire and Humberside economy ended 2006 on a positive note,” he said. “Further marked gains in new orders and activity supported a moderate improvement in the region’s labour market. The outlook for 2007 is good, with output growth set to be maintained on the back of solid demand.”