Contrary to the general negative atmosphere that's pervading UK business in the run up to the Chancellor's Autumn Statement – some areas of the economic climate is starting to improve in the UK.
For example, the percentage of businesses reporting a fall in pre-tax profits of 50 per cent of more was down three percentage points in 2012 compared with last year. The figures, compiled by Baker Tilly's SME Distressed Monitor, showed that 21 per cent reported such a decline this year, compared with 24 per cent last year.
The percentage of businesses stating that they had seen sales fall by around ten per cent was also lower this year than last, at 14 per cent.
However, while more companies are managing to keep things turning over, the research found that 24 per cent of SMEs surveyed had insufficient funds to pay their short-term debts due to problems with cash flow.
Bruce Mackay, Restructuring and Recovery Partner for Baker Tilly, explained the crux of the problem, noting that “many companies are selling more but at narrower margins”.
He added: “What concerns me is the large number of SMEs that are struggling to pay their short-term debts. Previous recessions have shown that businesses risk failing due to cash flow constraints as the economy starts to recover. This is mostly down to businesses overtrading, and I fear we may see more businesses going under if they aren’t able to manage their working capital needs effectively.”
The research backs up our recent look into the phenomenon of zombie businesses in the UK; companies that are limping on but are essentially doomed if they don't make some changes to their operations.
What entrepreneurs and people buying a business need to keep in mind is the fact that a new approach to a failing business can turnaround its fortunes. The strained state of the economy means that any flaws in a business plan will probably show up faster than in better times, but this is leaving rich pickings for those with an eye on expansion and a good understanding of the marketplace. 
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