Home Finance & Investments Signs Of Business Distress Rising Among Regional Firms

Signs Of Business Distress Rising Among Regional Firms

Signs of business distress among regional firms rose by six percentage points between April and November 2018, while indicators of commercial growth have remained virtually static.

New research by insolvency and restructuring trade body R3 indicates that almost two-thirds (64%) of companies across the North East, North West, Yorkshire and Humberside are now experiencing at least one of five key signs of business distress, compared to 58% last spring.

At the same time, the proportion of such firms saying they are experiencing one or more signs of business growth has remained almost unchanged at 73% (72% previously).

The most common sign of business distress among regional companies is late payment of invoices, although the proportion now saying they are owed payment on invoices over 30 days past their due date fell from 27% to 22% over the period in question.

A reduction in sales volumes and decreasing profits (both 18%) were the next most common signs of business distress in the latest research, followed by having to make redundancies and regularly maxing out the business’s overdraft (both 12%), and a recent fall in market share (9%).

On the upside, three in ten (30%) of the companies surveyed in the North East, North West, Yorkshire and Humberside said they were seeing an increase in sales volumes, while a quarter (24%) said they had seen profit levels increase recently.

A fifth (21%) of regional firms are investing in new equipment, while 15% reported seeing their market share grow and the same proportion is expanding either geographically, into new markets or by recruiting.

Andrew Haslam, chair of R3 in the North East and head of specialist business advisory firm FRP Advisory LLP’s Newcastle office, says: “There are positives and negatives to be taken from our latest research, but the clear rise in signs of business distress within regional firms is the most troubling of our findings.

“The uncertainties of Brexit are likely to be adding to the stresses felt by many companies in sectors where the post-Christmas period is traditionally their most challenging part of the year, and their resilience will doubtless be tested in the coming months.

“Much work has gone into tackling late payment practices in recent years at both a regional and national level, and while the percentage of companies reporting delays in payments due to them would ideally be zero, it’s good to see a reduction in the number that are still having problems in this respect.

“Late payment remains a key contributory factor in a high proportion of the business problems and insolvencies which R3 North East members work to resolve, and we’d hope to see this momentum being built on by enterprises of all sizes through 2019 and beyond.

“Signs of business distress can quickly turn into problems which threaten a company’s future prospects, and when things start to go downhill, it’s vital that owner/managers act quickly to get qualified advice on the range of solutions available that could help them put things right again.”