Signs of UK business growth sees biggest fall in four years

UK BUSINESS growth has fallen sharply to its lowest level since July 2013.

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 December 2015.  

This compares with the regional picture which shows 51% of businesses in Yorkshire and the North East seeing at least one sign of growth, 14% below last quarter’s figure.
 
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 nationally have reported at least one sign of growth. The 12-point fall in levels of business growth is the largest recorded in four years.

Adrian Berry, chair of R3 in Yorkshire and partner at Deloitte, says: “UK businesses have moved into a new phase of the economic cycle. The widespread rapid growth associated with recovery and the boost provided by low inflation and low fuel costs last year are really falling away now.
 
“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.”
 
In the past few surveys, fewer businesses have reported multiple signs of growth. Now more businesses are showing no signs of growth at all.”
 
Mr Berry 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.
 
“However, the longer that some businesses spend standing still, the more danger there is.”
 
According to the latest Business Distress Index, 18% of UK businesses are showing at least one sign of distress although this is slightly lower in Yorkshire and the North East where 16% of businesses are showing at least one sign of distress.
 
This is the second lowest the national 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 (14% of businesses in the region; 8% nationally); decreased profits (8% regionally; 7% nationally); having to make redundancies (2% regionally; 6% nationally); regularly using maximum overdraft (2% regionally; 5% nationally); and fallen market share (7% regionally; 5% nationally).
 
Mr Berry added: “Distress levels are still incredibly 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, more businesses could start to see at least one of these warning lights start to flash in the months ahead.”
 
Signs of business growth measured by R3 include: increased profits (28% of businesses regionally; 35% nationally); increased sales volumes (32% regionally; 33% nationally); investing in new equipment (28% regionally; 25% nationally); business expanding (19% regionally; 25% nationally); growing market share (22% regionally; 23% nationally).