Businesses Using Maximum Overdraft
More businesses are regularly using their maximum overdraft and many are showing increased signs of distress compared to last quarter, according to insolvency trade body R3.
R3’s quarterly Business Distress Index shows 22% of business are making frequent use of their maximum overdraft facility, while 43% are experiencing decreased profits, an eight point increase on last quarter.
The survey reveals that distress signs associated with cashflow are higher than in September 2010 – the proportion of businesses experiencing difficulty paying invoices is up three points to 17% and the number taking on new borrowing to pay down existing debt is up two points to 8%.
Only 22% of businesses reported they are experiencing increased profits. While one in five (20%) have seen their market share grow, nearly a quarter (24%) have seen their market share fall. The results suggest that businesses in the services sector are more likely to be experiencing growth than those in the manufacturing sector.
The research also found that although some businesses are growing, other key indicators of health remained low, with only 6% having increased export orders and only 11% saying they have increased their workforce.
R3 president Frances Coulson said: ‘Businesses are not out of the woods yet, with signs of distress increasing compared to last quarter on most key indicators. While current stresses might not be enough to push businesses over the edge, prolonged periods of distress will trigger an increase in formal insolvencies – we can see from our research that more businesses are having to use their maximum overdraft.’