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08/06/2015

UK business distress at record low

Levels of business distress in the UK are at a record low, with only a quarter (24%) of businesses reporting a key indicator of distress, according to the latest Business Distress Index from insolvency trade body R3.

Every indicator of distress tracked by R3 is at its lowest since the research began. 10% of businesses are experiencing decreased profits, 11% are experiencing falling sales volumes, 6% are seeing market share fall, 8% are regularly using their maximum overdraft, and 6% are making redundancies.

Phillip Sykes, President of R3, says: “Having stayed constant throughout 2014, UK business distress levels have fallen once more. Many companies will feel they have successfully negotiated the trickier parts of the rapid economic growth we saw last year. As growth slows, businesses are less at risk of over-extending themselves.

“The flip side of this is that signs of growth may start to become rarer as business growth hits a plateau.”

While the share of businesses (68%) experiencing at least one sign of growth returned to record highs, the share of businesses reporting individual signs of growth is dropping.

Phillip Sykes adds: “While the level of growth has returned to its peak, the pace of growth is weakening slightly. A higher number of businesses are seeing at least one indicator of growth but fewer are experiencing multiple growth signals.”

For example, the proportion of businesses investing in new equipment has fallen from 42% in October 2013 to 27% in April 2015.

Smaller businesses closing the gap with big business

Smaller businesses are recording the greatest drop in signs of distress. Only 20% of sole traders are reporting one or more signs of distress, compared to 50% in November 2014.

Phillip Sykes continues: “Although the largest businesses continue to experience the fewest signs of distress, it is encouraging to see difficulties for smaller businesses easing. It’s been a particularly difficult few years for many sole traders and they’re only now beginning to see recovery.”

Business confidence is strong with just 4% of businesses expecting their activity to decrease in the next year. 47% expect it to increase and 48% think it will stay the same.

“Looking ahead, businesses face a mixed picture. Although the likely date of an interest rate rise continues to be moved further into the future, a rise will come eventually. The Bank of England’s growth outlook remains solid but has been downgraded. And a referendum on British membership of the EU could cause uncertainty for business.”

UK businesses showing signs of distress

 

UK businesses showing signs of growth

Notes

Research undertaken by BDRC Continental, an award-winning insight agency. Questions were put to 500 UK businesses via BDRC Continental’s monthly Business Opinion Omnibus. Telephone-based interviews with a nationally representative sample of senior financial decision makers across the UK, weighted by size, region and sector. Fieldwork dates 7th to 17th April 2015

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.