Proportion of growing businesses falls to lowest rate since 2013

The signs of business growth in the UK have fallen to the lowest levels since 2013, according to a new report.

The latest Business Distress Index from R3, the association of business recovery professionals, also noted that signs of growth in UK businesses showed their biggest fall in 4 years.

The Business Distress Index is a long-running survey of 500 UK businesses, of different sizes and working within different sectors. In each survey undertaken since October 2013, at least 65% of businesses reported at least one sign of growth.

In December 2015, when the last survey was taken, 69% reported growth but that fell to 57% of businesses in March. This 12% fall in business growth indicators represents the biggest drop recorded by the survey in 4 years.

Signs of business growth measured in the survey include increased profits (reported by 35% of businesses), increased sales volumes (33%), investing in new equipment (25%), business expansion (25%) and a growing market share (23%).

The latest Index also showed that almost a fifth (18%) of UK businesses reported at least one sign of distress.

Signs of distress measured by the ongoing survey include decreased sales volumes (reported by 8% of businesses), decreased profits (7%), having to make redundancies (6%), regularly using their maximum overdraft (5%) and a decline in market share (5%).

The number of businesses exhibiting at least one sign of distress is actually the second lowest it has been since the start of R3’s Business Distress Index. The record low was in December last year, with 17% of businesses reporting signs of distress. The highest levels of distress were in March 2012, when almost two thirds (64%) of businesses reported experiencing at least one of R3’s distress signals. In some instances, this may see them requiring business recovery or alternative financial assistance in order to keep trading.

This means that more businesses are showing signs of growth than are currently showing signs of distress. According to R3 however growth might now be approaching a plateau, with the relatively rapid growth associated with economic recovery, low inflation and low fuel costs over the past year starting to fall away.

By Phil Smith

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