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Business size gap widens, R3 25 June 2013

The gap between small and large businesses experiencing levels of distress have significantly widened, according to R3’s latest Business Distress Index (BDI).

50% of small businesses are experiencing more signs of distress, including decrease profits, compared to 15% of large businesses.

In the previous BDI, December 2012, 30% of large businesses reported one or more signs of distress, showing a growing divide between small and large businesses.

38% of small businesses reported decreasing profits, with 30% reporting a reduction in sales volumes.

Lee Manning, president of R3, said conditions for small businesses “continue to be tough compared to large businesses.”

He explained: “Whilst the gap between the largest and smallest businesses has grown over the period both in terms of distress and growth, it is interesting to note that the percentage of businesses experiencing at least one growth indicator is broadly even across the middle of the range.

“This suggests that there are certain barriers to growth for small businesses, who are likely to be particularly susceptible to issues over costs and cash-flow fluctuations, which need to be addressed for these businesses to succeed.”

Overall, fewer businesses are reporting signs of distress according to R3’s research, with fewer business reporting having to make redundancies or making regular use of their maximum overdraft facility.

However, there are mixed messages for growth, with 47% of businesses reporting one or more signs of growth, a decrease of 4% since December 2012 but unchanged since March 2012.

Although the percentage of businesses reporting increased profits grew by 6% from December to 23%, the number of businesses investing in new equipment, increasing market share or reporting expansion all declined over the same period by 13%, 5%, and 4% respectively.

Manning said: The rather mixed picture on growth is more indicative of an economy that is just about ticking over, rather than forging ahead.

“After strong showings in the two previous waves of the BDI, the sharp reduction in the number of businesses investing in new equipment is a worrying sign.

“Taken together, the findings across this edition of the BDI suggest that whilst pressure on businesses may be easing slightly, growth remains sluggish and hard to come by.”



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