Fewer ‘distress’ signs among firms in East, says R3

SIGNS of financial distress among businesses in eastern England eased during the final three months of last year according to a survey by R3, the national trade body for insolvency practitioners.

Despite official figures showing that the UK economy contracted by 0.2% in the final quarter of 2011, the proportion of companies in the region reporting key distress indicators such as falling sales, lower profits and cash flow problems fell to 42%, compared with 64% the previous quarter, the latest R3 Business Distress Index reveals.

The report also indicates that only 3% of eastern region businesses had to make redundancies during the period, compared with a national average of 8%, while only 4% were finding it difficult to pay invoices on time, against 14% nationally.

Just 1% of businesses in the region said they had been forced to use their maximum overdraft facility frequently, well below the national average of 17%, although 35% of the region’s businesses saw their profits fall, slightly worse than the national average of 34%.

R3’s eastern region chairman Shay Lettice, a partner Cambridge accountancy firm Peters Elworthy & Moore, said: “Whilst consumer confidence remains low and businesses are still showing significant signs of distress, there does appear to be a distinct upturn in the regional situation.

“However, we have to take a pragmatic view and consider whether this could be the calm before the storm. Many ‘zombie’ businesses in East Anglia have been surviving, but not thriving, and we know that the vast proportion of businesses do not fail in the middle of a recession but when the economy is recovering.”