Northern businesses are showing more signs of being in difficulties than businesses in the rest of the country, according to the latest Business Distress Index published by insolvency trade body R3.
Indicators used by the index include cutting wages, cash flow problems, concern over debts and worries about bank loans.
Yorkshire R3 committee member Gareth Self, an insolvency practitioner with Sheffield-based corporate and debt recovery specialist, the P&A Group, said: “An alarming minority of the business community, particularly in the North, are struggling to address their financial woes.
“If these distressed businesses continue along this downward trend they may lose control of their mounting debt, which will push them into insolvency in the coming quarter.
“These businesses are allowing their debts to manifest instead of being able to pay them off; things aren’t improving for these businesses which are of real concern at a time when monetary and fiscal policy should be benefiting businesses. These businesses are likely to fall on hard times when interest rates inevitably rise, making it more difficult to service their debt.”
R3 found that 31 per cent of Northern businesses had cut pay, compared with 20 per cent in the South and 16 per cent in the Midlands.
Nearly one in four businesses in the North were using their maximum overdraft facility, compared with 14 per cent in the South and 13 per cent in the Midlands and a similar proportion reported they had lost regular customers, compared with 15 per cent in the rest of the country.
“Cash flow difficulties are particularly severe in the North and these, coupled with debt concern, paint a worrying picture for small businesses,” said Mr Self.
However, the report also revealed signs of distress on the whole have decreased in the last quarter, which Gareth Self says is ‘extremely positive for the majority of businesses who seem to be bouncing back from the recession’.