More SMEs displaying signs of distress than big businesses
- Distress signs are down overall on the year and the quarter
- Businesses with online payment facilities faring better than those without
29% of SMEs have seen a reduction in sales volumes, compared to 6% of big businesses - according to R3, the insolvency trade body. The research also found that over one third (34%) of SMEs are experiencing decreased profits compared to 19% of big businesses.
Frances Coulson, R3 President, comments:
“The Government has created a number of schemes to support SMEs, as they are vital to the health of the economy but they need more help to survive this difficult economic environment. However, it is clear that many SMEs are not financially robust enough to withstand the economic pressure. Either more support is needed in 2012 to enable a real recovery; or some businesses will inevitably fail rather than continue to limp along, damaging competition.”
Across the board, fewer businesses (58%) are feeling signs of distress. This is down by 10 percentage points on last quarter (68%) and significantly lower than December 2010, when over three quarters (77%) of businesses reported feeling signs of distress.
Frances Coulson comments:
“Could this be the calm before the storm? Many ‘zombie’ businesses have been surviving but not thriving and we know that businesses do not fail in the middle of a recession, but when the economy is recovering. The ‘insolvency lag’ we have seen in previous recessions is slower to materialise this time around, and traditionally insolvencies increase during the recovery phase. This is because a company’s financial outlook starts to improve and creditors stand to achieve greater returns than they would during the downturn. Furthermore, changes in the policies of lenders and the Government could force ‘a clear out of the system’, but whether this will happen in 2012 is doubtful.”
The report also found that businesses which are able to make and receive online payments are faring better than those who can’t. 39% of those who can’t use online payments are experiencing decreased profits, this is compared to 25% of those who can, and 34% of those who can’t use online payments have seen a reduction in sales volumes, compared to only 19% who can.
Frances Coulson continues:
“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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Notes to editors:
- SMEs are defined as businesses with a turnover up to £20million; large businesses are defined as those with a turnover of over £20million.
- Methodology note: BDRC Continental conducted 500 telephone interviews with small, medium and large business owners and Financial Directors between 28th November and 9th December 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.
- R3 is the trade body for Insolvency Professionals, and is made up of 97% of the UK’s Insolvency Practitioners from all over the UK.
- R3 comments on a wide variety of personal and corporate insolvency issues. Please 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 one of nine recognised professional bodies.
- R3 stands for ‘Rescue, Recovery, and Renewal’ and is also known as the Association of Business Recovery Professionals.