Fewer Businesses Report Signs of Distress

New research by insolvency and restructuring trade body R3 has revealed a fall in the number of so-called ‘zombie’ businesses in the UK, and also in the number of companies reporting signs of distress. 

One of the signs that a company is a ‘zombie’ business is that it is only paying the interest on its debts, and the number of companies in this position apparently dropped to 3% in December from 5% in April this year.

R3’s December research also saw other signs of business distress fall back from a recent upward trend, with 16% of UK businesses reporting at least one of five problems (decreased profits, reduction in sales volumes, regular use of maximum overdraft, recent fall in market share, making redundancies).

In September 2017, 25% of businesses had reported one of these signs of distress, up from 20% in April 2017 and 21% in September 2016.

However, the research also found that levels of business growth remain flat and well below record highs. Around 55% of UK businesses report at least one sign of growth (increased sales volumes, increased profits, investing in new equipment, market share growth, business expansion) compared to the high of 69% seen in December 2015 and June 2016.

Businesses’ economic pessimism is apparently also continuing to rise, with 27% of businesses now more pessimistic than they were three months ago – the highest this figure has been March 2013. Around 40% of businesses are more optimistic than three months ago, but this is the lowest this figure has been since March 2013.

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