Debt burden weighing heavily on the shoulders of many businesses

One in 10 businesses in the north of England are concerned about the amount they owe to their creditors, according to research released yesterday by insolvency trade body R3.

The research, which explores the financial position of businesses around Britain, reveals that smaller businesses owe on average around 110,000 to the bank, 82,000 to trade creditors and 27,000 to the Crown.

A third of all businesses (32 per cent) said they were concerned about their trade debts, while 24 per cent are worried about

finance, overdraft and banks

loans and 18 per cent are concerned about Crown debts, such as VAT.

Andrew Walker, the chairman of R3 in Yorkshire and a partner at law firm Irwin Mitchell, said: "In a fragile recovery, debt is an important part of working capital in most businesses.

"With VAT rises to come and the impact of public sector cutbacks yet to be felt in full, many businesses are concerned about their ability to repay the money they owe in fragile conditions.

"Worry about trade debts is often more keenly felt as businesses deal with this creditor group on a day-to-day basis – these debts can seem more obvious than those owed to the bank or the Crown."

Fewer businesses in the North are worried about their debts (9 per cent) than those in the South (19 per cent) or Midlands (28 per cent) while businesses in the manufacturing sector are more concerned than their counterparts in other areas.

Mr Walker said: "Early professional advice is the best way to allay fears over debt levels.

"Ascertaining whether your current debt levels are sustainable should fiscal and monetary policies change is an important challenge for all businesses."

The research organisation BDRC Continental conducted 500 telephone interviews with small, medium and large business owners and finance directors on behalf of R3 between September 6 and 17, 2010.

R3 is the trade body for insolvency professionals and represents 97 per cent of the UK's insolvency practitioners.