Business distress at record low rate

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A record low of just 18 per cent of businesses in Yorkshire and the North East are showing signs of distress, according to R3, the insolvency trade body.

And it compares well against the UK figure of 33 per cent in R3’s latest Business Distress Index.

The organisation has tracked five key indicators of business distress since March 2012 – decreasing profits, sales volumes, or market share, the regular use of maximum overdraft facilities, and new redundancies.

In the latest survey, all indicators are at, or near, record lows.

Gareth Self, Yorkshire R3 committee member and insolvency practitioner at the P&A Group in Sheffield, said: “Business distress has tumbled over the past two years as businesses have got over the worst of the recession.

“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 company 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.”