Business distress indicators remain high
TWO thirds of North West businesses have reported a fall in profits, according to insolvency trade body R3.
The findings suggest business conditions are getting tougher, as one in three also reported a drop in sales.
R3’s latest Business Distress Index revealed that 79% of businesses in the region are showing at least one sign of distress – the highest levels since the end of last year.
Overall, businesses in the North West – along with those in Yorkshire and the North East – fared worse than those in the rest of the country.
More than 60% of North West businesses reported decreased profits, whilst 29% said they were experiencing falling sales.
However, only 5% reported cash flow problems or difficulty in paying suppliers, while 9% said they were using their maximum overdraft facility fairly frequently – in each case, less than half of the national average.
Jeremy Oddie, chair of R3 in the North West and head of recoveries at Mitchell Charlesworth, said: “Business distress levels have been falling during the first two quarters but it’s clear that things have now taken a turn for the worse. This worrying trend mirrors the slowdown in GDP growth last quarter.
“Businesses are not out of the woods yet. While current stresses might not be enough to push them over the edge, prolonged periods of distress will trigger an increase in formal insolvencies. The first few years after a recession are traditionally difficult for businesses, as they need time to rebuild their reserves to support expansion.”
However, the research, carried out during September, found some positive signs of growth – 13% of businesses in the region said they had recently increased turnover and 10% had increased profits.
Mr Oddie added: “The private sector has some way to go before it can deliver the kind of expansion the government yearns for to drive the economy forwards. While there are some encouraging signs, important measures such as increasing exports and increasing employment register poorly.”
