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27/11/2015

What are the leading causes of business struggles?

One of the benefits of our member surveys is that the results provide an insight into what those in the profession, who are dealing with businesses and individuals in distress, are seeing on the ‘front-line’.

Among the topics in the October survey was a question on the leading causes of business struggles in cases that IPs have worked or advised on in the last three months. We will be tracking this in future surveys, so keep an eye out for future indicators.

According to members, the leading cause (53%) was under-performance by the businesses for ‘one-off’ reasons, which includes for example, lower than expected sales of a particular product or low sales thanks to poor weather.
 
This was followed by failure of a long-term business strategy (49%), for example over-expansion or failure of new products, and then errors or mistakes by businesses (40%).
 
These results suggest that many businesses are suffering from self-inflicted troubles rather than being victims of the economic climate.
 
Rounding up the top five causes of struggles were long-term fall in market share of business (32%) and inability to access finance (31%).
 
The latter issue has been a significant problem, particularly for smaller businesses, in recent years but the latest research from the FSB indicates that difficulties in this area may be beginning to ease. According to their latest Small Business Index, a record 62% of businesses applying for credit were successful, which is the highest since the series began at the start of 2013. Greater access to finance may help alleviate other common business struggles such as inability to expand or cash-flow issues.
 

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.