Signs of UK business growth in biggest fall in four years – R3

05 May 2016

UK business growth has fallen back to 2013 levels, according to new research by insolvency trade body R3.

57% of British businesses reported one sign of business growth in March, compared to 69% in the last survey in December 2015.

R3 says that the figures are the first signs of businesses' performance plateauing, but that signs of business distress are still relatively low.

The figures are from R3's latest Business Distress Index, a long-running survey of 500 UK businesses. In every survey since October 2013, at least 65% of businesses have reported at least one sign of growth. The 12-point fall in levels of business growth is the largest recorded in four years.

Andrew Tate, president of R3, says: "UK businesses have moved into a new phase of the economic cycle. The relatively rapid growth associated with recovery and the boost provided by low inflation and low fuel costs last year look as though they are now falling away."

"Headwinds, such as uncertainty over the future of the UK in the EU, stock market worries, or incoming compliance and reporting changes, are starting to pick up, too."

"The latest survey suggests some companies are still doing well and are showing several signs of growth, but more companies are showing no signs of growth at all."

Andrew Tate adds: "This is a deceleration rather than businesses going backwards. Some businesses may be consolidating following periods of rapid growth rather than running into real trouble. Levels of distress are still relatively low."

According to the latest Business Distress Index, 18% of UK businesses are showing at least one sign of distress.

This is the second lowest this figure has been since the start of the Business Distress Index (record low: 17% in December 2015), and well below the record 64% in March 2012.

Signs of distress measured by R3 include: decreased sales volumes (8% of businesses); decreased profits (7%); having to make redundancies (6%); regularly using maximum overdraft (5%); and fallen market share (5%).

Andrew Tate says: "Distress levels are still extremely low, especially when compared to just three years ago. Many more businesses are growing than are showing signs of distress and almost all the individual signs of distress are at record low levels. But, with growth starting to fall away, it looks as though the general business climate is tightening."

Signs of business growth measured by R3 include: increased profits (35% of businesses); increased sales volumes (33%); investing in new equipment (25%); business expanding (25%); growing market share (23%).

Signs of business growth in UK businesses 2012-2016

Signs of business distress in UK businesses 2012-2016

Notes to Editors

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 - 17th March 2016.