William Ballmann, chair of insolvency trade body R3 in Yorkshire and partner at Gateley, has commented following the news that a record low of just 18 per cent of businesses in Yorkshire and the north east are showing signs of business distress.
This is according to the latest Business Distress Index from R3. This compares with the UK figure of 33 per cent — also a record-breaking low.
R3 has tracked five key indicators of business distress since March 2012 — including decreasing profits, sales volumes, or market share, the regular use of maximum overdraft facilities, and new redundancies. Each indicator measures the share of UK businesses experiencing that particular sign of distress.
In the latest survey, all indicators are at or near record lows. The share of businesses in the region experiencing at least one sign of distress is now less than a third of businesses in the same position when the survey first started in March 2012 (63 per cent).
Ballman said: ‘Business distress has tumbled over the past two years as businesses have got over the worst of the recession and 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 business 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.’
He added: ‘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.’
R3’s latest survey also found that indicators of business growth in Yorkshire and the north east remain close to the record highs hit in the last survey in autumn 2013: 66 per cent of businesses are showing at least one sign of growth, slightly up from 63 per cent in October 2013 and a huge rise from just 29 per cent in March 2012.
Signs of business growth in the region include: investing in new equipment (40 per cent); increased sales volumes (40 per cent); increased profits (42 per cent); business expansion (38 per cent); and growing market share (27 per cent).
Ballmann said: ‘It’s very encouraging that business growth is keeping pace with the record figures we saw in the autumn. The repeat performance of the last survey’s strong figures gives weight to the idea that the economic upturn in the last six months was more than just a blip.
‘Growth is still slightly uneven, with some regions, such as our own, much more positive than others, and larger businesses do have more to celebrate than their smaller counterparts.’