Latest research from the Midlands branch of national insolvency and restructuring trade body R3 paints a challenging picture for the local economy, with indications that the key signs of distress remain high, while businesses are having to work harder for growth.
R3’s Business Distress Index, which regularly tracks the financial position of UK companies, highlights that there has been only a marginal decrease in the number of the region’s organisations experiencing signs of distress since November 2018. Of the key indicators monitored by R3, which include a decrease in profits and a fall in market share, 55% of East and West Midlands businesses report experiencing at least one sign of distress, compared to 58% in November 2018.
The research, which was carried out for R3 by BVA BDRC, shows that around one-in-five (18%) Midlands businesses is owed payments on invoices that are over 30 days past due, while just over one-in-ten (11%) are regularly using their maximum overdraft facility, and the same proportion (11%) have had to make redundancies. Just under one-in-five (19%) local companies are experiencing decreased profits, and around one-in-ten (9%) is reporting a recent fall in market share, with over one-in-ten (13%) noting a reduction in sales volumes.
The R3 survey also reveals that some key signs of growth have increased since November 2018, although profits appear not to be rising at a similar rate. There has been an increase in the number of Midlands businesses reporting expansion, from around one-in-six (15%) to more than one-in-five (22%) currently. There has also been a rise in those reporting growth in their market share, increasing over the same time period from one-in-ten local businesses (11%) to one-in-five (19%). The proportion of companies reporting an increase in profits, however, has stayed relatively constant over this time, rising from 16% to only 18%.
R3 Midlands Chair Eddie Williams, a partner at Grant Thornton in the East Midlands, said: “This R3 report reveals the extent to which businesses have to fight to survive and grow in this current economic climate. While it is positive that increasing numbers of businesses are expanding and increasing market share, it is obvious how much harder they are now having to work to maintain or increase profits.
“The proportion of companies experiencing decreased profits and battling to get their invoices paid on time is of particular concern. Struggling businesses must take appropriate professional advice early if they are to afford themselves the best opportunity of survival and recovery.”