British business appears to have made it through the worst of the recession, with the latest GDP figures confirming that the country did not take a third dip into recession in the first quarter of the year. But growth remained low and uncertain, with an increase of just 0.3 per cent recorded. This follows the previous quarter's negative growth of the same amount. The second quarter's growth is far from confirmed and the general atmosphere remains hesitant.
The latest Red Flag Alert from Begbies Traynor reflected this atmosphere, with an eight per cent increase recorded in the number of businesses indicating 'critical' levels of financial distress between the last quarter of 2012 and the first three months of 2013.
The report did find, however, that there was a 34 per cent decline in the number of 'critical' businesses in the country in the first quarter of this year compared to the same three-month period last year. This longer-term balance suggests that there is a broader trend of growth in the country, although it is going to take some time to get there and there will be many more bankruptcies and business administrations on the way.
Difficulties accessing funding are the main cause of these problems. Begbies Traynor found that the number of companies securing new funding in the first quarter of 2013 was down 14.5 per cent from the first quarter of 2012 and down 11 per cent on the last quarter of 2012.
Julie Palmer, partner with the accountancy group, commented: “The underlying trend is arguably one of an improving picture. However, given the slight increase in distress compared to the previous quarter, it remains to be seen if we are out of the woods yet.
“With business rate increases planned in April, HMRC’s new PAYE Real Time Information requirements coming into effect, and further minimum wage rises ahead there are still significant headwinds for the UK SME sector, which is typically less able to bear the burden of these changes than their larger counterparts.”
We would hazard a guess that funding problems will be the death of a number of businesses yet, but with the ongoing improvements in broader economic indicators, this could offer many distressed business buyers the opportunities they have been waiting for.
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