Signs of business distress fall

Chris Radford, Midlands chair of R3

Signs of business distress in the Midlands appear to have fallen over the last quarter, but so have signs of economic optimism and growth, according to new research.

Of a sample of the region’s businesses surveyed in December, only 12% reported at least one of five key indicators of business distress (decreased profits, a reduction in sales, regular use of the maximum overdraft limit, a fall in market share, or making redundancies).

The Midlands branch of R3, the insolvency and restructuring trade body, said this compared to 30% in September 2017, up from 20% in April 2017 and 22% in September 2016.

The statistics, which form part of a long-running survey of business distress by R3 and BDRC, also point to a downturn in business growth over the past quarter.

Only 59% of Midlands businesses reported at least one key sign of growth, compared to 65% in September 2017 and 63% in April 2017. Such signs include increased sales or profits, investment in new equipment, market share growth and business expansion.

Economic optimism is also continuing to falter with 25% of Midlands businesses now reportedly more pessimistic than they were three months ago. Furthermore, only 44% of the region’s firms expect their activity to increase in 2018.

R3 Midlands chairman Chris Radford, a partner at Gateley in Birmingham, said: “The apparent improvement in distress levels is welcome, but with growth subdued and rising pessimism, it is not clear how long this improvement might last.

“In such an unstable climate, it is imperative for business owners to monitor their finances carefully and plan for all eventualities. At the first sign of significant cash flow difficulties, it is important to take relevant professional advice. When R3’s members are called in to help early enough, there is much that can be done to rescue and support businesses beyond traditional insolvency solutions.”