More firms showing signs of distress
A report from a R3 business distress survey has found that businesses are showing less signs of financial growth and more signs of financial difficulty.
In this climate businesses are struggling to survive, with falling revenues or increased overdraft usage, rising from one in five in April to one in four in September. Businesses simply aren’t growing either, with the number of employers showing signs of expansion falling by 9% between April and last month to 53%.
Adrian Hyde, president of R3, added that insolvency professionals were “reporting a rise in the volume of enquiries.”
“It looks like a new phase of the economic cycle has started,” he added.
The economic picture is getting “murkier” Hyde goes on. Certainly with decreased sales volumes and less room to manoeuvre, not much is needed to push employers into insolvency.
The survey further observed the rising business rates, higher minimum wage, and rising import prices as reasons for fixed costs rising over the past year.
The economy is not growing fast enough or strong enough to offset these higher expenses.
While some businesses have seen some growth, those reporting increased profits fell to 20% from 33% in April and increased sales volumes fell to 26%, compared with 33% in April.
Firms are nonetheless thinking ahead, and some are bracing for tougher times. In an attempt to solidify their cash position, only 22% of businesses in April were investing in new equipment, compared to 33% in September.
The survey declares: “With only just over a quarter of firms growing their sales volumes, down from nearly four in ten a year ago, the outlook is more downbeat than it has been for some time.”
James Salmon from The Credit Protection Association said “the results of this survey show that now is not the time to be complacent regarding late paying customers. With the threat of rising insolvencies, it is important for our members that they make sure they paid promptly and not over exposed should one of their customers become insolvent.”
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