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Low Distress Record for UK Businesses

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According to the latest Business Distress Index from R3 (the insolvency trade body), a record low of 33% of British businesses are showing signs of business distress. In fact, the signs of business growth have reached near record highs.

Key Indicators of Business Distress

R3 tracked five key indicators of business distress over the period since March 2012. These included shrinking profits, sales volumes or market share, regular use of maximum overdraft facilities, as well as redundancy figures.

In the latest survey, which measured the share of UK businesses experiencing a particular sign of distress and then compared the results to those from March 2012, all the indicators are at – or near – a record low. The share of businesses experiencing at least one sign of distress is now almost half the 64% that were in the same position two years ago.

Slow Economic Recovery has been Beneficial

Giles Frampton, R3 vice-president, says: “Historically, business failures increase as the economy bounces back: rapid economic growth can be a problem for a business that used up cash reserves in a recession or that isn’t prepared for expansion. However, low interest rates and the much slower recovery we have had up until the last nine months or so have brought struggling businesses time to sort out their problems.”

Distress levels over the last six months are falling back to ‘normal’ levels, which may be a sign that the recent pick-up in the economy is beginning to have an effect.

Business Growth is on the Up

R3’s latest survey also found that signs of business growth remain close to the record highs reached when the survey was last carried out in autumn 2013. These include:

  • Investing in new equipment (37%)
  • Increased sales volumes (34%)
  • Increased profits (30%)
  • Business expansion (28%)
  • Growing market share (28%)

Frampton comments: “It’s very encouraging that business growth is keeping pace with the record figures we saw in the autumn. The repeat performance of the last survey’s strong figures gives weight to the idea that the economic upturn in the last six months was more than just a blip.”

If your company is experiencing any signs of business distress, please speak to a financial adviser or Licensed Insolvency Practitioner for practical advice on your options.

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