South East: Business Distress Index suggests businesses are preparing for the upturn

We’re on the up! That’s the message from businesses in the South East according to research from the insolvency trade body, R3. The association, which represents insolvency practitioners and regularly conducts reports into the state of business in the UK, has fed back positive findings for the region from its latest Business Distress Index.

The research shows that a quarter of businesses in the region (25%) have seen an increase in sales volumes. Similarly, some 28% say they are experiencing increased profits and 24% say their market share has grown recently.

Perhaps most promisingly the percentage of businesses in the South East that are not showing any indicators of distress has increased dramatically by 42%. The figure now stands at 78%, compared to just 36% in March 2012.

The report makes for positive reading as it suggests businesses in the South East are preparing themselves for the upturn. Over a quarter (28%) are investing in new equipment and just under a quarter (24%) are expanding either geographically, by increasing staff numbers or through new areas of business.

James Stares, southern regional chair of R3 and director at Grant Thornton in Southampton, commented: “While it’s clear that there’s still a long road ahead in terms of UK recovery, it is very encouraging to see that businesses in the South East are preparing for the upturn. Investment in equipment and people can often be taken as an indicator of business confidence and these latest results suggest there is a sense of optimism.”

The results of the latest wave of R3’s Business Distress Index are particularly promising when held against results from this time last year. Back then, only 22% in the South East had seen an increase in sales volumes, 17% had seen increased profits and 15% had grown their market share.

While the research from R3 painted a positive picture for the South East overall, evidence showed businesses were still facing difficulty.

Of those questioned in the region, over a third (34%) said a reduction in consumer spending was affecting demand. In addition, 30% said the rising costs of fuel and utilities were the biggest problems facing their business.

Stares added: “Concerns over utility bills and revenue show that businesses still feel they are being squeezed on both sides. Businesses depend on utilities to operate, making it hard to cut costs. With consumers unwilling to spend, businesses will be increasingly concerned about their margins.”