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Survey marks a year of record high signs of growth/record low signs of distress

By CreditMan Tuesday, December 23, 2014

Levels of UK business growth remain near their record highs, with two-thirds (65%) of businesses reporting one or more key indicators of growth, according to the latest Business Distress Index from insolvency trade body R3.

40% of businesses are reporting an increasing sales volume, 36% are investing in new equipment, 34% are seeing increased profits, and 38% of businesses are expanding.

Meanwhile, business distress levels are staying near record lows. The proportion of companies reporting at least one key indicator of distress is 35%, down from 64% in March 2012.

Phillip Sykes, Vice-President of R3, says: “This survey marks a year of record high signs of business growth and record low business distress.”

“Signs of growth are starting to become more balanced too. This time last year, many businesses were reporting increasing sales and new investment, but not increasing profits or business expansion. These latter two indicators have caught up.”

“Hopefully, businesses will now be starting to really feel the benefits of economic recovery. Four out of five of our growth indicators have increased since the summer.”

Phillip Sykes adds: “Businesses do need to be careful that they don’t run before they can walk. Cash flow can become an unexpected issue in recovery.”

Larger businesses continue to show more positive signs of growth compared to their smaller counterparts. 88% of larger businesses (250+ employees) are experiencing one or more indicators of growth (up from 82% in June 2014), compared to 46% of sole traders (49% in June 2014).

As well as signs of growth, R3’s Business Distress Index tracks the number of UK business that are: experiencing decreased profits (20%), sales volumes (14%), or market share (10%), and are regularly using their maximum overdraft (12%), or are making redundancies (8%).

Phillip Sykes comments: “Signs of business distress have remained very stable over the past year having tumbled before that. While most indicators are at a record low, which is very encouraging, there are still plenty of businesses affected. The 12% regularly using their maximum overdraft on a regular basis is equivalent to 206,000 businesses.”

Signs of growth continue to be uneven across the regions, with signs of growth strongest in the Midlands. 74% of Midlands businesses are showing at least one growth indicator, as are 71% of businesses in the North, and 54% of businesses in the South. In three of the past four surveys, signs of growth have been most prevalent in the Midlands.

Phillip Sykes adds: “All regions have seen signs of growth improve markedly since the beginning of last year, but these have been much more resilient in the Midlands. To a degree, levels of growth are levelling off or dropping slightly in the North and South.”

R3 is the trade body for Insolvency Professionals, and represents the UK’s Insolvency Practitioners.