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A rising number of UK businesses are showing signs of financial distress in the wake of higher operational costs, new figures show.
Insolvency and restructuring trade body R3 also found that businesses are displaying fewer indicators of growth as a result.
The number of firms displaying signs of expansion fell 9% between April and September this year, so only around half of firms are showing signs of a positive outlook.
To make matters worse, the number of businesses’ showing signs of financial distress increased from one in five in April to one in four in September.
Rising overdraft usage and falling revenues were among the key indicators, with the latter reflective of a reduction in consumer confidence.
R3 President Adrian Hyde has suggested that “a new economic cycle has started”, following a period where businesses displayed record high growth and record low distress levels
Insolvency practitioners have reported a rise in enquires, he added, as companies have seen their fixed costs increase during the last 18 months.
Rising inflation, an increase to the minimum wage, higher business rates and the falling value of the pound have all helped to increase levels of insolvency risk.
The number of firms reporting plans to invest in new equipment fell sharply by 11% between April and September, to the point where only 22% of businesses plan to purchase.
R3 has suggested that this move is reflective of business owners planning ahead to build up cash reserves with trouble and tougher times potentially on the horizon.
Mr Hyde says the “outlook is more downbeat than it has been for some time”, as just over a quarter of firms are currently growing their sales volumes, down from around four in ten a year ago.
Businesses are also considering contingency planning to ensure they have strategies they can work from during times of crisis.
Further research from Albion Capital reports that companies are also factoring in Brexit to their planning, as a third of businesses are altering their strategies ahead of Britain leaving the EU.
As part of this, the majority of businesses that are planning to enter new markets are either looking within the UK or outside of the EU for openings and opportunities.
By Phil Smith