Insolvency Partner Comments On Latest Trends

Northern businesses are experiencing fewer signs of distress compared with the rest of the country, according to the latest quarterly Business Distress Index from insolvency trade body R3. 

While nationally the research showed that 22% of businesses are making frequent use of their maximum overdraft facility, fewer businesses in the North (17%) are having to do so.  The figures also reveal that 40% of Northern businesses are experiencing decreased profits, slightly lower than the UK average of 43%.

For the first time, the report also asked respondents if they are experiencing a number of growth indicators. The results, which mirror the distress signals, showed some encouraging signs with 29% of Northern businesses reporting growth in market share, significantly above the national averages of 20% who had seen market share grow.  The research found that businesses in the services sector are more likely to be experiencing growth than those in the manufacturing sector.

Andrew Walker, chair of R3 in Yorkshire and partner at Irwin Mitchell, comments:
“Businesses are not out of the woods yet and we are still seeing relatively high levels of companies entering formal insolvency proceedings in the region.  However, those in the North who have survived, do seem to be faring slightly better than those in other parts of the country, showing less of the early symptoms of distress and even some signs of growth. However, this should be viewed with caution as the first few years after a recession are traditionally difficult as it is some time before businesses can sufficiently rebuild their reserves to support expansion.”

The research also found that in spite of the fact that some businesses are growing, other key indicators of health remained low with only 9% of businesses in the North having increased turnover and only 7% saying they have increased their workforce. 

Mr Walker continued: “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 it is encouraging that almost a third of businesses in the North are increasing their market share, important measures such as increasing exports and increasing employment register poorly, showing that there is still a long way to go.”