Business distress at four-year low

By April 9, 2014Finance, News

Signs of distress amongst businesses in the North are at their lowest in over four years, according to research by the insolvency trade body R3.

Just 25% of businesses in the region are now showing signs of distress, compared to 68% in Autumn 2010 when R3 first launched its Business Distress Index.

The index shows that signs of distress amongst northern businesses peaked at 83% in early 2011, falling to 43% in early 2012, 33% in early 2013 and 28% by the end of the year.

Richard Wolff, North West regional chair of R3 and Head of Corporate Recovery and Insolvency at JMW Solicitors in Manchester, said: “Business distress has fallen steadily over the past two years as businesses have got over the worst of the recession. This has been matched by steadily falling corporate insolvency numbers.

“Historically, business failures increase as the economy bounces back – sudden growth can be a problem for businesses that have used up their cash reserves or are not prepared for expansion. However, low interest rates and the much slower pace of recovery we have had up until the last nine months or so have given many struggling businesses time to sort out their problems and prepare for growth.”

The index tracks five key indicators of business distress. The latest Business Distress Index shows that only 17% of businesses in the North have seen a decline in sales recently while 23% reported decreased profits, 6% have had to make redundancies and 5% are regularly using their maximum overdraft levels.

By contrast 71% of businesses in the region showed signs of growth including investing in new equipment (41%), increased sales volumes (35%), increased profits (33%), business expansion (27%) and growing market share (26%).

Well over half (59%) of northern businesses were optimistic about the year ahead, compared to just 8% who were pessimistic. 55% expected to increase sales in the year ahead compared to just 2% who expected a decrease.

Leave a Reply