UK business distress levels at record low - research

Insolvency trade specialist R3 finds only 24 per cent of UK firms are suffering from distress

UK businesses suffering from distress are at a record low, according to the latest research from insolvency trade body R3.

The research found only one in four firms reported indicators of distress, following interviews with 500 UK businesses in April. The firms noting at least one sign of distress (24 per cent) have dropped by 40 percentage points from March 2012 and by 11 percentage points since November 2014.

All distress levels which R3 monitored are at their lowest levels since it began its research in March 2012. The percentage of firms suffering decreased profits has halved since the last survey in November and is now at 10 per cent. Meanwhile, only three per cent of businesses surveyed were making redundancies.

Other areas of distress monitored were firms using their maximum overdraft, seeing a drop in their market share and falling sales volumes.

Phillip Sykes, R3 president, said: "Having stayed constant throughout 2014, UK business distress levels have fallen once more. Many companies will feel they have successfully negotiated the trickier parts of the rapid economic growth we saw last year."

This return to growth was highlighted with the report finding that 68 per cent of businesses reported at least one indicator of growth.

But Sykes did warn that growth is now slowing.

"While the level of growth has returned to its peak, the pace of growth is weakening slightly. A higher number of businesses are seeing at least one indicator of growth but fewer are experiencing multiple growth signals," he said.

The research was also good news for smaller businesses, as they are experiencing the greatest fall in signs of distress, with 20 per cent of sole traders noting one or more sign of distress, down from 50 per cent in November 2014.

Looking forward, R3 found that 47 per cent of firms expected to see their business activity increasing next year, with only four per cent anticipating a drop.

"Looking ahead, businesses face a mixed picture. Although the likely date of an interest rate rise continues to be moved further into the future, a rise will come eventually.

"The Bank of England's growth outlook remains solid but has been downgraded. And a referendum on British membership of the EU could cause uncertainty for business," Sykes added.