South East: Business distress indicators drop to record low, reports R3

The level of business distress in the South East has hit a new record low, with just 8% of businesses reporting a key indicator of distress, according to new research by the Southern Committee of R3, the insolvency trade body.

When the survey began in March 2012, 64% of businesses were reporting indicators of distress, including a reduction in sales volume, decreased profit, regularly using their maximum overdraft and making redundancies.

The finding represents a sizeable fall in the level of distress from the last survey in September 2015 (27%).

Several of the individual indicators also reported new record lows: reduction in sales volume (5%), decreased profit (5%) and regularly using maximum overdraft (2%). Reduction in sales volume showed the largest decrease from the last time the survey was run, down from 21% in September.

The South East is also performing far better than the national average. Across the country 17% of businesses have reported a key indicator of stress.

Andrew Watling, chairman of the Southern Committee of R3 and a partner at Quantuma in Southampton, said: "The levels of businesses in distress have plummeted since our survey began in 2012. This isn't surprising given the current state of the economy. There has been a reasonable level of growth in recent years in the South East and the record low interest rates have facilitated high liquidity.

"Reductions in fuel prices may also have cross-subsidised cost increases in other areas and assisted in keeping the pressure on costs low. These factors, combined with low inflation, are easing the difficulties of businesses.

"It's particularly positive to see the drop in businesses experiencing decreased sales volumes and profits. Healthier profitability will help businesses stay on top of their cashflow and prevent over-reliance on credit.”