New phase of the economic cycle could have started, reveals new report

Chris Radford

The Midlands may be bucking the national trend with an increase in businesses reporting signs of growth, according to new statistics published this week by the regional branch of insolvency and restructuring trade body R3.

The research, part of a long-running survey of business distress by R3 and BDRC Continental, found that the proportion of Midlands companies reporting one or more signs of growth increased to 67% in September 2017 from 55% in September 2016. Nationally, the percentage of businesses reporting growth fell to 53% from 62% twelve months previously.

Conversely, the R3 Midlands report also reveals an increase in the percentage of local businesses reporting one or more signs of distress, highlighting a mixed economic outlook for the region overall.

The percentage of Midlands companies saying they were experiencing at least one sign of distress has jumped to 32%, up from 24% in September 2016.

The R3 report also shows that companies’ financial flexibility may be shrinking, as 17% of local firms surveyed said they were regularly using their maximum overdraft, up from 5% in April, and a negligible percentage who were in this position in September last year.

R3 Midlands chairman Chris Radford, a Partner at the Nottingham office of Gateley, said: “It is encouraging to see evidence of business growth in the region, but we must be mindful of a very firm increase in business distress levels in the past year. The R3 research could indicate that a new phase of the economic cycle has started.

“This is driven by the fact that many companies have seen their fixed costs rise in recent months, whether due to higher business rates, an increase in the National Minimum Wage, inflation’s upward trajectory, higher fuel prices or the fall in the pound pushing up import prices. While the regional business engine appears to be offsetting these greater outlays in part, there are still many companies in a precarious financial position.

“It is important to note that there are always several options for those businesses experiencing financial distress. The sooner expert advice is sought from a regulated insolvency or restructuring professional, the more can be done to provide the best possible outcome.”