More firms ‘in distress’ amid slowest growth rate for 4 years
Published: 24 January 2018
There’s been a rise in the number of firms experiencing financial difficulties as the rate of business growth slows to its lowest level in 4 years.
Research by the insolvency and restructuring trade body, R3,
found that the number of companies reporting one or more signs of growth fell
to 53% in September 2017, down from 62% in September 2016. It’s the lowest
figure since July 2013.
Meanwhile, firms experiencing one or more signs of distress
jumped to 25%, up from 21% in September 2016.
Adrian Hyde, President of R3 said: “There’s been a very firm
increase in distress levels over the last 18 months, alongside a drop in
growth. Businesses have moved on from record high growth levels and record low
distress levels, and it looks like a new phase of the economic cycle has
“With sales volumes falling for a larger number of
companies, and with more firms reaching the limit of their financial
facilities, the economic picture is getting murkier. For a lot of companies
existing on the edge, just one shock – such as a rise in the cost of borrowing,
the failure of a major supplier or customer, or a fall in consumer confidence –
could be enough to push them into insolvency.
“Many companies have seen their fixed costs rise over the
past year, whether due to higher business rates, an increase in the National
Minimum Wage, inflation’s upward trajectory, higher fuel prices, or the fall in
the pound pushing up import prices. Meanwhile the economy’s growth has not been
rapid enough to offset these greater outlays, leaving some firms in a
The figures highlight the need for businesses to keep a
tight rein on finances as other companies start to feel the strain.
One early warning sign that a business may be in trouble is
the late payment of invoices. If they become insolvent and fail to pay, they
can jeopardise the viability of otherwise successful enterprises.
Firms need to be ready and willing to take early action when
necessary to ensure prompt payment of invoices to protect their own future.
Quite often, a letter from a solicitor is enough to ensure payment; if not,
there are other legal avenues available up to and including court action.
Please contact Matthew Sigsworth in our Dispute Resolution Team if you would like more information about the issues raised in this article or the legal options available in relation to bad debts.