R3, the association for insolvency, business recovery and turnaround professionals has released their quarterly ‘Business Distress Index’ revealing 850,000 businesses are currently experiencing falling profits.
Decreased profits’ was identified as the most common cause of distress, experienced this quarter by nearly 50% of UK businesses. 44% of businesses (or 750,000) have seen a reduction in their sales volumes, whilst 32% have seen a recent fall in market share.
R3 President Steven Law commented:
“These signs of distress on their own do not suggest insolvency is inevitable but they should be observed over the longer term. 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 out of recession. Although corporate insolvency numbers have decreased over 2010, experience of past recessions tell us to expect them to continue rising as the recession finishes in an ‘insolvency lag’.
“These signs of distress on their own do not suggest insolvency is inevitable but they should be observed over the longer term. 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 out of recession. Although corporate insolvency numbers have decreased over 2010, experience of past recessions tell us to expect them to continue rising as the recession finishes in an ‘insolvency lag’.
He said: “The UK’s insolvency practitioners are expecting corporate insolvency numbers to increase for 2011 to 27,500 (In 2009 the figure was 26,400).”
