Business Growth At Record High

Business Growth At Record High

The latest figures from the UK Business Distress Index, compiled by the Association of Business Recovery Professionals (R3), report encouraging signs of UK business growth.

The index uses 5 key indicators to measure business growth being:-

  1. Investment in new equipment;
  2. Increased sales volumes;
  3. Business expansion;
  4. Increased profits; and
  5. Increased market share.

In the six months to October 2013, 68% of businesses surveyed reported experiencing one or more of these indicators of growth.

Levels of optimism among UK businesses is also at a record high, with 59% of business reporting feeling more optimistic about the economy when surveyed in October 2013 than three months ago.

R3 president Liz Bingham cautions: “There are still caveats to the good news, though: for example, those businesses currently having the best time tend to be larger businesses in the South East.”

For businesses in the Midlands, the picture is much more mixed.  Regionally, the East Midlands had the highest proportion of businesses showing one or more indicators of growth (84%), but the West Midlands had the smallest proportion (53%). Clearly, a significant proportion of businesses in the UK are still struggling to make up for lost ground over the past few years.
 

The 5 Key Indicators of Business Distress

The Index also monitors business distress, using 5 key indicators being:-

  1. Decreased profits;
  2. Decreased sales volumes;
  3. Regularly using maximum overdraft;
  4. Falling market share; and
  5. Having to make one or more redundancies.

The proportion of businesses reporting one or more indicators of distress was 37%, an increase of two percentage points on the last survey in July 2013, but it is important to note that distress indicators are not necessarily a threat to economic recovery.  Business recovery experts have commented for some time on the tendency for stress indicators to rise in line with a return to economic growth: it is known that businesses can struggle to adjust to the improving economic climate, with increasing demand exerting pressure on supply chains and streamlined workforces, and increased confidence among creditors in pursuing debts leading to further restrictions on cash flows.  Emerging from recession, businesses can keenly feel the effects of years of under-investment in equipment, infrastructure and software.

The overall picture, however, is extremely positive.  With only 37% of businesses reporting one or more indicators of distress currently, compared with 53% in June 2012 meaning the downward trend is significant and sustained.

Particularly encouraging are the reports from SMEs, which show considerable improvements in their financial situation since the last R3 survey in July 2013.

Businesses across the country are beginning to look to the future, and the increased confidence in the UK economy is certain to have a positive effect on growth.

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