Business growth and distress survey 'could indicate a new phase of the economic cycle has started'
More businesses in the East of England are showing signs of growth than the national average, but wider indicators suggest "a new phase of the economic cycle" may have started.
Those are among the findings of a report from insolvency trade body R3 and BDRC, which also found the proportion of the region’s businesses in distress had risen to 28%, from 18% last year.
The results paint a mixed picture of the region’s economic outlook, with the proportion of survey respondents showing growth increasing to 64% in September 2017, up from 59% a year earlier, while the national average slumped from 62% to 53%.
The report suggests companies’ financial flexibility may be shrinking, as 19% of local firms surveyed said they were regularly using their maximum overdraft, up from 3% in April, and a negligible percentage who were in this position in September last year.
R3 Eastern chairman Mark Upton said the warning signs should not be overlooked as many companies remained in a “precarious” position.
“It is encouraging to see evidence of business growth in the region, but we must be mindful of a very firm increase in business distress levels in the past year. The R3 research could indicate that a new phase of the economic cycle has started.
Mr Upton, a partner at Ensors Chartered Accountants in Ipswich, said: “This is driven by the fact that many companies have seen their fixed costs rise in recent months, 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.
“While the regional economy appears to be offsetting these greater outlays in part, there are still many companies in a precarious financial position.
“It is important to note that there are always several options for those businesses experiencing financial distress. The sooner expert advice is sought from a regulated insolvency or restructuring professional, the more can be done to provide the best possible outcome.”
The R3 findings come just days after the Lloyds Bank purchasing managers index (PMI) showed a sharp upturn in growth in the East of England, thanks mainly to strong export orders.
The region’s PMI, in which any reading above 50 represents growth, jumped from September’s reading of 55.5 to 57.3 in October – its highest for six months and well above the average of 55.8 for the UK as a whole.