Firms in danger of going bust at record low

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​THE number of Yorkshire firms in danger of going bust has hit a record low​​, according to the latest Business Distress Index from R3, the insolvency trade body.

​Just 18​ per cent​ of businesses in Yorkshire and the North East are showing signs of business​ ​distress​, much lower than the UK national average of 33​ percent, which is​ also a record-breaking low​ for the country as a whole.​

R3 tracked five key indicators of business ​distress ​​– decreasing​ ​profits, ​lower ​sales volumes, ​smaller ​market share, the regular use of maximum overdraft facilities and new​ ​redundancies.

​​​The indicator measures the share of UK businesses experiencing ​each particular sign​ ​of distress.

In the latest survey, all indicators are at or near record lows.

The ​percentage of businesses in the region​ ​experiencing at least one sign of distress is now less than a third of ​the level it was ​when the survey first started in March 2012​.​

William Ballmann, chair of insolvency trade body R3 in Yorkshire and partner at national law firm​ ​Gateley LLP, sa​id​: “Business distress has tumbled over the past two years as businesses have got​ ​over the worst of the recession​.

“I​t is encouraging to see that the level in Yorkshire and the North​ ​East is almost half of the relatively low national level.​“H​e added that this had​ been matched by steadily falling​ ​corporate insolvency numbers.

“It’s great to see Yorkshire performing significantly better than much of the country​. T​he resilience​ ​of businesses in the region is down to prudence during the downturn and good management which​ ​is now beginning to pay dividends as the recovery takes hold.​”

R3 said that​, historically, business failures ​had actually ​increase​d​ ​when​ the economy bounced back​.

“R​apid economic growth can​ ​be a problem for a business that used up cash reserves in a recession or that isn’t prepared for​ ​expansion​,” said Mr Ballmann​.

​“​However low interest rates and the much slower recovery we have had up until the last​ ​nine months or so have bought struggling businesses in our area time to sort out their problems.”

​R3 said that business distress had been falling much more slowly over the past six months than it had done previously.

“It may be that distress levels are falling back to normal levels, or that the recent pick-up in the economy is beginning to have an effect,” said Mr Ballmann.

R3’s latest survey also found that indicators of business growth in Yorkshire and the North East are close to the record highs hit in the last survey in autumn 2013.

Two thirds (66 per cent) of businesses are showing at least one sign of growth, slightly up from 63 per cent in October 2013 and a huge rise from just 29 per cent in March 2012.

Signs of business growth in the region include: investing in new equipment (40​ per cent​); increased sales​ ​volumes (40​ per cent​); increased profits (42​ per cent​); business expansion (38​ per cent​) and growing market share (27​ per cent​).

​“It’s very encouraging that business growth is keeping pace with the record figures we saw in the autumn,” said Mr Ballmann.

“The repeat performance of the last survey’s strong figures gives weight to the idea that the economic upturn in the last six months was more than just a blip.

“Growth is still slightly uneven, with some regions, such as our own, much more positive than​ ​others, and larger businesses do have more to celebrate than their smaller counterparts.​“

On a more negative note, only 11​ per cent​ of British businesses and 15​ per cent​ of Yorkshire and North East businesses ​said the burden​ ​of business regulation had fallen since the 2010 general election, despite ​G​overnment promises to​ ​cut red tape.

​Over a third (34​ per cent)​ of ​Yorkshire ​businesses ​said their​ ​regulatory burden had increased,​a bit lower than the national figure of 39 per cent, while 49​ per cent​ feel that it had stayed the same​, against the national figure of​ 47​ per cent.

“The Government’s record 
on deregulation has been decidedly mixed so far​,” said Mr Ballmann.