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Record low firms are ‘in distress’
9:30am Wednesday 23rd April 2014 in News
The number of regional firms in financial distress has fallen to a record low of 18 per cent, according to new figures from insolvency trade body R3.
Its latest Business Distress Index said the fIgure for Yorkshire and the North East was well below the national average of 33 per cent of companies in distress.
R3 tracked five key indicators of business distress since March 2012 – including decreasing profits, sales volumes, or market share, the regular use of maximum overdraft facilities, and new redundancies.
The survey also confirmed that growth among regional firms is running at a record high level.
R3 said the proportion of regional businesses experiencing at least one sign of distress is less than a third of the figure in the first survey in March 2012, when the figure was 63 per cent.
Chris Wood (pictured), Yorkshire R3 vice-chairman and partner at Cleckheaton-based Clough Corporate Solutions, said: “Business distress has tumbled over the past two years as businesses have got over the worst of the recession, and it is encouraging to see that the level in Yorkshire and the North East is almost half of the relatively low national level. This has been matched by steadily falling corporate insolvency numbers.
“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 bought struggling businesses in our area time to sort out their problems.
“It is interesting to see, however, that business distress has been falling much more slowly over the past six months than it had done previously. It may be that distress levels are falling back to ‘normal’ levels, or that the recent pick-up in the economy is beginning to have an effect.”
R3 found that business growth in Yorkshire and the North East remain close to the record highs seen in autumn 2013 survey, with 66 per cent of businesses showing at least one sign of growth.
Growth signs included the 40 per cent of Yorkshire firms investing in new equipment, 40 per cent achieving increased sales volumes, 42 per cent seeing higher profits and 38 per cent planning business expansion.
Mr Wood added: “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.