'Less distressed in the North' – survey

FEWER companies in the North are showing signs of distress over falling profits, according to a new report.

Decreased profits have been identified as the most common current sign of distress by nearly 50 per cent of UK businesses, according to a new Business Distress Index launched by R3, the insolvency trade body.

While half of businesses nationwide are experiencing falling profits, the picture is less severe in the North with 41 per cent suffering, compared with 50 per cent in the South and 68 per cent in the Midlands.

Designed to rank early warning signs of distress to businesses and accompanied by advice on how to avoid company insolvency, the index also revealed that 44 per cent of businesses nationally had seen a reduction in sales volume, while 32 per cent have seen a recent fall in market share.

Andrew Walker, chair of R3 in Yorkshire, said: "These signs of distress on their own do not suggest insolvency is automatic, but they are early warning signs and should be observed over the longer term.

Worrying

"It is worrying that the most common signs recorded in September this year are decreased profits and a reduction in sales volume, given we are now officially out of recession.

"Although corporate insolvency numbers have decreased during 2010, experience of past recessions tells us to expect them to continue rising as recession often finishes with an 'insolvency lag'. Indeed our members, the UK's insolvency practitioners, are expecting corporate insolvency numbers to increase to 27,500 for 2011, from 26,400 in 2009."

The survey reveals business owners tend to have a more optimistic outlook, with only three per cent stating it is likely they will go insolvent.

Mr Walker said: "While confidence remains high, and the liquidation rate remains low, we are expecting to see a few more corporate insolvencies working their way through the system, especially if interest rates increase and Time To Pay agreements lessen."

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