R3’s latest Business Distress Index (BDI), which reports regularly on the levels of growth and distress of companies across the UK, showed that a record 85% of firms in the North East, Yorkshire and Humberside are showing at least one key indicator of growth, compared to a national average of 65%.
And the research also found that an overwhelming 94% of firms across the region expect business activity to increase (40%) or at least stay the same (54%) during 2015.
R3 has tracked five key business indicators – investment in new equipment, increased sales volume, business expansion, increased profits, and growing market share – since March 2012, with each one measuring the share of regional businesses experiencing that particular sign of growth.
The proportions of regional businesses experiencing business expansion (49%) and investing in new equipment (55%) are well ahead of the national figures for these indicators (38% and 36% respectively), while the regional and national figures for those with increased sales volumes (38% vs 40%), increased profits (29% vs 34%) and a growing market share (23% vs 28%) are broadly comparable.
However, the latest BDI also shows that signs of growth and distress are still uneven around the country, with signs of growth strongest in the Midlands. Almost three-quarters (74%) of Midlands businesses are showing at least one growth indicator, as are 71% of businesses in the North (an area which also includes Scotland, Northern Ireland and the North West, alongside the North East, Yorkshire and Humberside), and 54% of businesses in the South.
Correspondingly, while 40% of businesses in the South are reporting at least one sign of distress, this decreases to 32% of businesses in the Midlands and 30% in the North.
Allan Kelly, North East chair of insolvency trade body R3 and a restructuring partner in Baker Tilly North East, says: “The Business Distress Index continues to reveal very encouraging results for the North East, and to have such a high proportion of regional firms showing clear and sustained signs of growth could finally suggest that the economic recovery is beginning to show tangible outcomes.
“Our latest survey marks a year of record high signs of business growth and record low business distress, and there are also signs that these growth indicators are also starting to become more balanced.
“Businesses do need to remain vigilant that they don’t try to run before they can walk, as cash flow can become an unexpected issue in recovery for those that don’t.
“Controlling the growth opportunities that are increasingly available to North East businesses is always one of the key challenges facing management as the economy emerges from difficult periods, and ensuring that all aspects of a business’s operations and finances can keep up with the pace of growth has to be an absolute priority for management teams.”
BDRC conducted 500 telephone interviews with small, medium and large business owners and Financial Directors. 58 were from the North East and Yorkshire and Humberside.