Pressure easing on business in North, says R3

By January 31, 2012Finance, News

Distress levels among in the North of England remain high – but the pressure is easing and there are tentative signs of recovery, according to research by the insolvency trade body R3.

R3’s latest Business Distress Index shows that 60 per cent of companies in the North are reporting at least one sign of distress, compared to 79 per cent last quarter. There were reductions in nearly all the main indicators of distress, and also stronger indications of growth.

The survey found that 30 per cent per cent of Northern businesses said they were suffering decreased profits, whilst 29 per cent had experienced falling sales, 17 per cent were having cash-flow problems, nine per cent found it hard to pay invoices on time and four per cent had made redundancies.

By contrast, 36 per cent of companies said they were investing in new equipment such as IT – up from 21 per cent the previous quarter, while 30 per cent had increased profits and 16 per cent were expanding.

Jeremy Oddie, chair of R3 in the North West and head of recoveries at Mitchell Charlesworth, said: “The results are encouraging and indicate early signs of recovery. However levels of distress remain high and, with recent figures showing that the economy contracted in the last quarter, it confirms that we are by no means out of the woods yet. 2012 will be a dangerous time for businesses as they face difficult economic conditions and lower consumer spending at a time when they need to focus on rebuilding their reserves to support expansion.”

The report also found that, in the country as a whole, SMEs displayed higher levels of distress than big businesses. Twenty-nine per cent of SMEs have seen a reduction in sales volumes, compared to only six per cent of big businesses.

It revealed that companies which were able to make and receive online payments were faring better than those who couldn’t. Thirty-nine per cent of those who were unable to use online payments were experiencing decreased profits, compared to 25 per cent of those who could, and 34 per cent of those unable to use online payments had seen a reduction in sales volumes, compared to only 19 per cent who could.

Jeremy Oddie added: “Businesses and consumers find it easier and quicker to make and receive payments online. In 2012, it is very likely that those who are not making use of online services to streamline basic business processes will get left behind.”

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