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Press Release

UK businesses see signs of distress increase across the board, with over half experiencing decreased profits

17 February 2011

R3's second quarterly 'Business Distress Index', a barometer of financial distress, reveals increased signs of distress in December last year, with 'decreased profits' being the leading sign. R3, the insolvency trade body, surveyed over 500 business owners, 54% of whom recorded decreased profits, an increase of 5% from September.

The index also reveals a 4% jump in the number of businesses making redundancies and a 3% increase in those introducing pay cuts or freezes. The findings also show an increase in the number of businesses finding it difficult to pay invoices on time, which now stands at 268,000, the equivalent of one in six.

R3's President Steven Law commented:

"The overall picture indicates that conditions have got more challenging from September to December last year – though we must remember that during this period businesses were affected by the adverse weather conditions. However, the increase in businesses struggling to pay bills on time is worrying as this is the technical definition of insolvency.

"This coupled with an increase in the number of businesses using the maximum overdraft facility, which stands at 1 in 5, suggests that many businesses are running on empty."

Conversely, the survey finds that while more businesses are recording decreased profits there has been a 7% drop in those seeing a reduction in sales volumes - 37%.

Steven Law continued:

"These figures suggest that businesses that are selling large volumes are doing so at a discounted price or have seen an increase in overheads and other outgoings. For many, an increase in interest rates could push them over the edge. Seeking professional advice early could help these businesses to avoid insolvency."



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R3 The Insolvency Trade Body

R3 The Insolvency Trade Body

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