‘Stress’ signs for firms on the decline

SOME key signs of business “distress” are on the decline in East Anglia, but concern remains for many smaller firms, according to new research from R3, the body for insolvency professionals.

R3’s latest Business Distress Index, a quarterly barometer of the financial position of UK companies, indicates a fall in the number of firms suffering a fall in profits, down 14% on the previous quarter to just under half.

There has also been a fall in the number of companies losing sales volume, which is down 7% on the previous quarter to around one third.

However, it was not all good news, with the survey revealing an increase in some other measures of distress including a rise in the number of businesses insisting on payment in advance which increased by 2% to one in five and a similar increase in the number of organisations struggling to pay invoices on time.

There were particular concerns about cashflow among small firms with 19% struggling to pay invoices on time and 17% using their maximum overdraft facility.

R3’s eastern region chairman, Shay Lettice, a partner at Cambridge accountancy firm PEM, said: “This national R3 report is very much a tale of two halves and indicative of what is happening here in the region.

“It is extremely positive that fewer businesses are experiencing key signs of distress, yet difficulties among a significant minority of undertakings, particularly smaller businesses, have intensified.

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“The effects of public sector cutbacks and future interest rate rises are likely to be felt very keenly by this group.”

He added: “Despite the encouraging economic indications overall, I remain concerned about the sizeable number of businesses struggling to pay their invoices on time, as well as maintain cashflow and answer growing demands from suppliers for payment in advance.

“The stark warning signs of corporate failure are still apparent, despite some signs of economic recovery,” he added.

“Struggling businesses must continue to take professional advice early if they are to afford themselves the best opportunity of survival.”