Partner Article

Profits falling at Northern firms

New research has indicated the profit levels have fallen at almost half of all businesses across the North during the first three months of 2012.

Insolvency Trade Body R3 found that 49% of all businesses in the North saw profits drop between January and March - a figure which is a third higher than the national average of 36%.

The survey also found that the percentage of firms in the North East, Yorkshire and Humberside what had seen sales volumes increase or had invested in new equipment were at 14% and 15% respectively, lower than the national average of 25%.

Steve Ross, chair of R3 in the north east and a director in the Corporate Recovery department of the Sunderland office of accountancy firm RSM Tenon, says: “There’s no doubt that it’s been a tough start to the year, especially for the likes of the retail and construction sectors, and the findings of our latest Business Distress Index resonate with the ONS data that revealed the UK’s return to recession.

“History tells us that that the greatest number of businesses do not fail in the middle of a recession, but instead when the economy is recovering, and these latest findings could indicate that the expected ‘insolvency lag’ we have seen in previous recessions is could be about to begin to materialise.”

Few regional firms make full use of their maximum overdraft facility, and only 10% have made redundancies this year compared to 13% across the UK.

Across the country as a whole, the number of businesses feeling signs of distress have risen for the first time in more than a year, although this has yet to translate into an increase in corporate insolvencies.

Mr Ross continued: “However, despite the clear and present dangers that the economy faces, there are still an awful lot of businesses in the region that are expanding, taking on new staff and looking towards a bright future – and with much of the economic recovery based on the elusive notion of commercial and consumer ‘confidence’, it’s important to focus on the economic positives as well as the negatives.

“Regional businesses that find themselves facing financial difficulties need to take decisive action to address and resolve them sooner rather than later – this sort of proactive approach greatly increases the chances of them improving their prospects of working through short-term difficulties towards long-term recovery and renewed success.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .