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26/07/2011

Fewer businesses believe banks are supportive

The number of businesses who believe the banks are being supportive has decreased, according to insolvency trade body R3’s Business Distress Index. The quarterly report, which looks at the financial position of UK businesses, reveals that one in three (32%) believe the banks to be supportive, compared to 43% of businesses in the previous quarter.

Businesses perceive that support from creditors has decreased across all creditor groups; 23% of businesses believe trade creditors to be supportive compared to 39% in March 2011, while 26% of businesses believe HMRC are a supportive creditor compared to 39% three months ago.

R3 President, Frances Coulson, comments:
“The increase in the number of businesses who no longer feel that banks are being supportive indicates that a growing proportion of the business community are either struggling to service their existing debts or finding it hard to acquire further lines of credit.

“As we have seen in previous recessions, once the economy begins to show signs of recovery, creditors tend to make a more concerted effort to pursue those who are indebted to them and tighten up their lending facilities. However, we are still in the early stages of recovery and it takes time for this to translate into tangible relief for businesses. For the businesses that used all of their reserves to survive the recession, supportive creditors are more important than ever.

“Insolvency Practitioners working with distressed businesses are seeing an increase in the number of Time to Pay applications being rejected. This may well explain why HMRC is no longer seen as a supportive creditor.

“On the other hand, a reduction in perceived support from creditors may indicate a diminished need to call on creditors by businesses, as the index revealed key signs of distress and fear of insolvency have decreased.”


For further information please contact:
Charlotte Towerton, R3 External Communications Officer
t: 020 7566 4203   m: 07918 161 219 e: charlotte.towerton@r3.org.uk


Methodology note: BDRC Continental conducted 502 telephone interviews with small, medium and large business owners and Financial Directors between 6th and 16th June 2011. Quotas are set by size, region and sector and the data weighted to the profile of UK businesses. The respondent in each case is a senior financial decision maker.

BDRC has recently revamped its Business Omnibus. The sample has been expanded to include Northern Ireland businesses and some of the detailed sector and regional bands have been rearranged to provide more robust sub-sample sizes for analysis. A ‘control’ survey was conducted showing no change in overall findings as a result of methodology change.


R3 Press Office

Notes to editors:

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

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.